Verizon Communications agreed Monday to buy Yahoo’s operating business for $4.83 billion in cash, ending a months-long auction and placing one of the internet’s oldest consumer brands inside a telecommunications company trying to challenge Google and Facebook in mobile advertising. The transaction includes Yahoo’s search, mail, news, finance, sports, video, Tumblr and advertising-technology operations.

The deal excludes Yahoo’s cash, its stake in Alibaba Group, its interest in Yahoo Japan and certain patents, assets that will remain in a publicly traded investment company. Yahoo will continue to operate independently until the transaction closes, expected in the first quarter of 2017 after shareholder and regulatory approvals. The companies’ joint announcement puts the purchase price at approximately $4.83 billion, subject to adjustments.

Verizon buys reach and advertising machinery

Verizon’s rationale extends beyond Yahoo’s familiar home page. The company is assembling technology that can sell and measure advertisements across mobile devices, websites and video. It acquired AOL for $4.4 billion last year, gaining a portfolio of media brands and automated advertising platforms. Yahoo adds a larger consumer audience and more data about search, email, finance and media use.

Yahoo says it reaches more than 1 billion monthly users, including 600 million on mobile devices. Combined with AOL, that scale could make Verizon a more substantial seller of digital advertising, though it remains far behind Google and Facebook. Reuters described the agreement as the centerpiece of Verizon’s effort to move beyond a mature wireless business into content and ad technology.

The operating assets will be integrated with AOL under Marni Walden, Verizon’s executive vice president for product innovation and new businesses. AOL Chief Executive Tim Armstrong said Yahoo’s audience and content would complement AOL’s programmatic-advertising systems. The strategy depends on using Verizon’s distribution and customer relationships without alienating users or compromising trust.

A diminished price for an internet pioneer

Yahoo helped define the consumer internet in the 1990s, organizing websites in a directory before expanding into search, email, news and other services. At its peak it commanded a market value above $100 billion and received a $44.6 billion takeover proposal from Microsoft in 2008. The current price reflects years of declining advertising share and repeated attempts to find a coherent strategy.

Marissa Mayer, a former Google executive who became Yahoo’s chief executive in 2012, invested in mobile products, redesigned core services and bought Tumblr for about $1.1 billion. But search and display advertising continued to lose ground. Yahoo’s second-quarter results showed search revenue down 13 percent and display revenue down 7 percent from a year earlier, alongside a reduction of roughly 2,100 employees.

After pressure from activist investors, Yahoo’s board began considering strategic alternatives in February. The auction separated the operating business from the Asian equity stakes that account for much of Yahoo’s market value. That structure lets shareholders retain exposure to Alibaba and Yahoo Japan while transferring a complex collection of consumer products, real estate and advertising contracts to Verizon.

The assets inside the agreement

Yahoo Mail alone has roughly 225 million monthly active users, and Yahoo Finance, Sports and News remain among the most visited services in their categories. Time’s review of the product portfolio noted that Verizon has not yet said how brands or services will be combined, leaving employees and users uncertain about overlapping operations.

The transaction also includes BrightRoll video advertising, Flurry mobile analytics and Gemini native advertising, tools intended to connect audience data with ad purchasing. Verizon wants those systems to work with AOL’s platforms and with video delivered over its network. The company’s ability to integrate them will determine whether Yahoo is merely a large collection of websites or the foundation of a competitive advertising stack.

An SEC-filed copy of the announcement records Mayer’s argument that combining with Verizon and AOL can expand distribution and accelerate mobile, video, native advertising and social products. She told employees she plans to remain through the transition, though her longer-term role is unclear.

Scale does not erase the market gap

Digital advertising is growing rapidly, particularly on mobile devices, but much of that growth flows to two companies. A 2016 internet-trends analysis summarized by Wired found that Google and Facebook captured 76 percent of U.S. digital-ad growth. Verizon’s purchases supply reach, data and technology, but they do not automatically produce the engagement or advertiser demand those platforms command.

Verizon also must navigate potential concerns about combining communications data with browsing and content behavior. The company says the transaction will accelerate mobile media, but users may scrutinize how information is shared across a carrier, AOL and Yahoo. Regulators will review the deal, though analysts generally expect approval because Verizon is not a leading search or portal competitor.

Wired’s analysis of the strategy described Verizon’s challenge as escaping the role of a network utility whose margins are pressured by competition and whose customers spend increasing time with services owned by other companies. Owning media and ad systems could capture more of that value, but it also places Verizon in businesses with different cultures and economics.

Closing conditions and unanswered questions

The agreement requires Yahoo shareholder approval and customary regulatory clearances. Yahoo’s remaining company will change its name and continue to hold the Asian stakes and other excluded assets. The operating business is expected to transfer without Yahoo’s debt, and Yahoo intends to return substantially all net cash to shareholders.

Yahoo’s report of the agreement emphasizes the continuity of products during the closing period. That reassurance is important because a prolonged integration or broad service cuts could drive users and advertisers elsewhere before Verizon realizes the audience it is buying.

The purchase gives Yahoo’s operating business a new owner and concludes a strategic review, but it does not by itself resolve the central competitive problem. Verizon will have hundreds of millions of users, recognized media brands and substantial advertising technology. It must now show that those pieces can function as one business—and that a communications company can turn two fading internet pioneers into a durable mobile platform.