Why would the Daily Mail want to buy Yahoo?

Yahoo has been looking for a buyer for its core business since February

Marissa Mayer, Yahoo CEO (Kimberly White/Getty Images)

The parent company of the Daily Mail has tried to pour cold water on media speculation over its potential bid to buy Yahoo.

The Daily Mail and General Trust, which owns the Daily Mail and several other publications, said on Wednesday that while had not submitted a bid to buy Yahoo, it remained in discussion with parties interested in Yahoo.

Meanwhile the Yahoo board is hard at work pursuing potential bids for the sale of the company’s core assets. Verizon, the US telecoms behemoth, is a frontrunner. Other bidders are said to include private equity groups including TPG, Apollo and Bain Capital, as well as the Yellow Pages publisher YP Holdings.

Bidders will be reassured by Yahoo’s annual results on Tuesday, which came in slightly better than analysts expected, but still fell 11.3 per cent to $1.09 billion in the first quarter. The company reported a net loss of $99 million, compared to a profit of $21 million a year ago.

Yahoo has been looking for a buyer for its core business since February. It extended the initial deadline for bids to April 18 and may still take offers after this date, analysts said.

The question is why the Daily Mail, which is already the most-visited English language news site in the world, would take on beleaguered Yahoo.

MailOnline has already beaten all other UK newspapers at the advertising revenue game, growing digital revenue from £10 million in 2010 to £73 million in 2015.

In 2015, £46 million in advertising came from the UK and just £18 million from the US. The Mail wants to lift those US figures, in part to offset its losses in print.

In Yahoo, still the most read news site in the US, it sees an opportunity.

Thomas Caldecott, analyst at Enders, said to grow digital revenue further, MailOnline must look beyond the UK, where its audience and revenue growth have reached saturation point.

“The US is clearly a key market for growth,” Caldecott told the Independent. “The benefits for audience scale are clear: in a crowded US news market where the MailOnline does not have the brand recognition of its American competitors, the acquisition of the Yahoo properties should prove a quick and effective way of boosting its audience and improving its offer to advertisers.”

In return, Yahoo could benefit from the Daily Mail’s knowledge monetising content online.

Finding a third party will be decisive. With a net debt of £700 million or twice its earnings, the Daily Mail group could not launch a bid alone.

“A consortium approach seems most likely,” said Alex Degroot, analyst at Peel Hunt.

That co-bidder is said to be General Atlantic, the equity firm that backed Axel Springer’s Business Insider purchase. If successful, the Daily Mail might integrate Yahoo’s news and sports channels and leave the rest, inlcuding advertising technology, email and search businesses, to a private equity firm seeking a quick sale.

While the Daily Mail group can’t compete with the user-base of Verizon, it can offer Yahoo expertise in monetising content.

“The Daily Mail is the most-looked at online service in the world, they’re the only ones really making money out of it and Yahoo has a huge number of news based sites. I can really see what value it has from that group,” said Richard Holway, chairman at TechMarketView.

“They would take the content and either host it on their site and monetise it through streaming video and other ways used to monetise content, which the Daily Mail is very good at,” Mr Holway said.

But DMGT might never get the chance. With Verizon, which already acquired AOL for £4.4 billion in 2015, circling, Yahoo may be swayed by the big bidders on its home turf.