Verizon is set to pay around $5 billion (3.8 billion) for Yahoo's ailing search and advertising businesses, according to reports.
The unconfirmed bid comes after the once-great internet search giant admitted a $440 million loss in financial results released last week, and the firm would give the US telco a vast swathe of customer data.
Verizon, which recently bought AOL, a contemporary of Yahoo's in the early 2000s, might merge the two acquisitions into one behemoth that could potentially challenge firms like Google, Facebook and Twitter.
"Verizon is hoping that combining Yahoo's content with AOL's ad technology platform and Verizon's own insights into user data can make the advertising inventory much more valuable," Craig Moffett, an analyst at MoffettNathanson, told Bloomberg.
But Forrester analyst Shar VanBoskirk said Yahoo's huge amount of customer data would boost Verizon's advertising play.
In comments provided to IT Pro, she said: "The more access to customer data it has (online through Yahoo and AOL, in home via cable boxes, on mobile via smart devices) the more targeted it can be with advertising and sponsored content or product placements across those same devices.
"This allows Verizon to create better ad products which are competitive against primarily online giants (Google) and creates a better user experience which is competitive against other cable and telecom providers."
Yahoo's failure to succeed
The alleged takeover comes after Yahoo CEO Marissa Mayer abandoned her plans to spin off Yahoo's $32 billion Alibaba stake in December 2015.
Under pressure from investors, she instead decided to spin off Yahoo's core assets - including Yahoo Mail and its search business - a significant shift in strategy from her original intention to return Yahoo to the forefront of technology companies. Forrester's VanBoskirk believes Yahoo's failure was a lack of brand identity.
"For 13 years, Yahoo has failed to exploit as a unified whole what is actually an excellent set of parts," she said. "Since its days as an online portal (circa 1999), Yahoo hasn't been able to clearly define what it is, and what value it provides. This created confusion among users (is Yahoo a search engine? a producer of online video? a place to aggregate my photos? a social media community?)."
She added: "But it also challenged Yahoo's business strategy. When you aren't sure what kind of company you are trying to be: What acquisitions should you make? What efforts do you prioritise? Which leaders do you hire?"
Verizon and Yahoo 'makes sense'
But the proposed tie-up between the telco and the tech giant would be a good one, VanBoskirk said. "If Verizon can manage this acquisition in a customer-first way, the combined entity would go a long way toward creating an experience concierge which could be really valuable to consumers and advertisers," she said.
