Verizon CEO Lowell McAdam just explained why he paid $5 billion for Yahoo

Lowell McAdam Verizon 8282Business InsiderVerizon CEO Lowell McAdam

Verizon bought Yahoo for $4.8 billion on Monday.

That’s not a huge check for Verizon, a company worth $220 billion.

Still, its CEO Lowell McAdam sees big opportunities in Yahoo, who will lead Verizon’s digital initiatives with AOL, the web service he bought for $4.4 billion last year.

“By acquiring Yahoo’s operating business, we are scaling up to be a major competitor in mobile media. Yahoo’s operations provide a valuable portfolio of online properties and mobile applications, which attract over 1 billion monthly active consumer views,” McAdam said during Verizon’s earnings call Tuesday.

More specifically, McAdam said the deal will help Verizon become a bigger player in digital video, a segment he estimates to be worth $180 billion by 2020. He pointed out that market is currently owned by two companies (Google and Facebook), but people are “hungry for alternatives.”

“Verizon intends to be a significant player in this space,” he said.

Among Yahoo’s assets, Lowell was particularly upbeat about its content services, including Yahoo Sports, Finance, and News. In fact, he says he’s already spoken with the commissioners of the NFL and NBA about a Verizon-owned Yahoo and how to expand its offerings together. He also sees Yahoo Finance as its “strongest asset today” and plans to find more partnership opportunities with AOL’s existing publications like TechCrunch and Huffington Post.

“Going forward, this acquisition will put us in a great position as a top global media company and give us a significant source of revenue growth for the future,” he said.

Lowell also made a brief mention of Yahoo CEO Marissa Mayer, indicating that he expects her to work with AOL CEO Tim Armstrong to come up with a plan for how to integrate the two entities:

“…this is such a dynamic environment, we should be looking for additional things to meet customers’ needs. I fully expect that when Tim and Marissa put their heads together, we will have a long list. And we will be disciplined, as we always are, and they will be good investments that will drive us to take a larger share of this growing market.”

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