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AOL’s Tim Armstrong says ‘scale is imperative’ in the Verizon-Yahoo deal

The new majordomo of the combined unit says there’s new structure to come

Oath CEO Tim Armstrong
“Cheekbones” finally gets his prey
Asa Mathat

Today, in an interview after the deal that everyone knew was coming was finally announced, AOL head Tim Armstrong said that “scale is imperative” in a world dominated by Facebook and Google.

“I think this is true across global media, that scale is as imperative now as it’s ever been,” he said, noting that seven billion people are connected over mobile. To get to a big chunk of them, Armstrong said, is why Verizon will pay $4.83 billion for Yahoo.

The longtime internet exec talked to Recode — yes, professional adults linked to Yahoo have finally lifted the idiotic banishment of our site — about why he pushed hard for Verizon to buy Yahoo and also about what comes next in a process that is expected to take six months to nine months to close.

The telco giant confirmed today that it had entered into an agreement to buy the iconic Silicon Valley internet company; Armstrong will be leading the integration of the two companies and their myriad of advertising and content assets.

That’s the focus now, said Armstrong. But because this has been an auction process, he noted, rather than a direct sale, there has been no time to make specific integration plans between Verizon and Yahoo. In fact, according to many sources, Verizon has had little insight into a number of issues, including the terms of the contracts with key employees, that it will need to make plans for the future.

Thus, that process will now begin in earnest, as Verizon really gets to look under the hood and begin to formulate what it wants to do with the assets it has bought. That includes understanding which Yahoo businesses are healthy and which are not, who runs which division and where all the bodies are buried.

And make no mistake, there are bodies all over Yahoo.

“The integration begins this week and we are headed out to see the team,” said Armstrong. “The next step is: How do we differentiate our strategy?”

Those discussions will also include creating the structure of the new entity once combined. “We have nothing nailed,” said Armstrong, when asked about CEO Marissa Mayer’s role after all is said and done. “We will work with her over the next months and on the next steps, and depending on where we get, we will have clarity on everyone’s roles.”

Armstrong, who once worked with Mayer at Google, is being polite. She’ll not be with the company after the transaction is approved, said many sources.

But she’ll be there for now. It might surprise you, but Verizon has no power to run Yahoo until the deal actually closes. While current Yahoo execs are barred under terms of the agreement from making any major moves — such as acquisitions or investments — they will be the ones running the company until the transaction is done.

As to possible layoffs going forward, Armstrong said nothing has been decided. “The deal that we contemplated is about growing the company and did not start with synergies,” said Armstrong. “We will be walking through a pretty direct process about what is structure and then cost structure and there will be synergy, but it is not at the top of our list.”

In other words, not yet, so Yahoos can breathe easier for now.

While Armstrong did acknowledge some worry about combining two companies that have lost ground to bigger rivals over the years, he added that Yahoo was a bargain given its big audience and strong brand. “If you look at other valuations across the board and look at the assets that Yahoo brings, it is absolutely the best deal for us,” said Armstrong.

That is especially true in the new world order in which Google and Facebook run the table. “We have to have real differentiation in the future, because there is no doubt in my mind that they going to continue to gain strength and you have to respect them at the highest level,” said Armstrong. “The bar for us is to try to stay at that level, but that does not mean [we] have to be them.”

Armstrong said that was why Verizon upped its bid after lobbing in a lower one in previous rounds. “I would say Yahoo did a good job in maximizing value in the course of the auction,” he said.

He said he had sympathy for Mayer’s struggles, given his own at AOL. “Having a close seat to what Marissa has gone through, from a very tough activist-driven focus by Wall Street to some of the products that did not make it to market, I get it,” Armstrong said. “It’s tough to understand and deal with the public company environment right now.”

Tim Armstrong on the Sale of AOL to Verizon in 2015

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