Would-be buyers are apparently placing lowball bids for Yahoo’s core business, offering $2 billion to $3 billion instead of the $4 billion to $8 billion anticipated in April, according to a report in the Wall Street Journal. These acquisitions would include only Yahoo’s actual day-to-day business, not its stake in Alibaba, which is where most of its current market value of $35 billion is locked up.
This chart from Statista shows the problem with that core business. Yahoo’s main source of revenue, advertising, has been flat or shrinking for six years now. Meanwhile, Google has increased its ad revenue more than 3x in the same period to almost $70 billion a year, and Facebook has come out of nowhere to build a nearly $20 billion annual ad business.
Yahoo still has plenty of valuable assets, including a huge audience and some patents and other intellectual property. But nobody has been able to figure out how to get its ad revenue growing again, and these would-be buyers are placing a very low probability on that happening. Bidders reportedly include Verizon (which owns AOL), investment firms TPG and Bain, and a team led by investors Warren Buffett and Dan Gilbert.