Verizon buys AOL for US$4.4bn – telco makes a push into content

12 May 2015

Internet content giant AOL is to be acquired by US telecoms company Verizon for US$4.4bn. Verizon will buy AOL for US$50 a share, a 17pc premium.

News of the acquisition sent AOL’s stock shooting up by 19pc in pre-market trading.

AOL, which owns prominent internet properties including TechCrunch, Engadget and The Huffington Post, has been razor-focused on a programmatic advertising strategy that has been bearing fruit for the company.

That focus on programmatic was considered a key factor in the company beating analyst estimates with Q1 revenues of US$625m.

Under the terms of the deal, AOL will become a subsidiary of Verizon.

Verizon said the move was part of its LTE (4G) wireless video and over-the-top (OTT) strategy and will also support and connect with its internet of things platforms.

Digital trailblazer

“Verizon’s vision is to provide customers with a premium digital experience based on a global multiscreen network platform,” said Lowell McAdam, chiarman and CEO of Verizon. “This acquisition supports our strategy to provide a cross-screen connection for consumers, creators and advertisers to deliver that premium customer experience.”

McAdam continued:  “AOL has once again become a digital trailblazer, and we are excited at the prospect of charting a new course together in the digitally connected world.

“At Verizon, we’ve been strategically investing in emerging technology, including Verizon Digital Media Services and OTT, that taps into the market shift to digital content and advertising. AOL’s advertising model aligns with this approach, and the advertising platform provides a key tool for us to develop future revenue streams.”

AOL chairman and CEO of AOL Tim Armstrong will continue to lead AOL’s operations after the acquisition closes.

“Verizon is a leader in mobile and OTT connected platforms, and the combination of Verizon and AOL creates a unique and scaled mobile and OTT media platform for creators, consumers and advertisers.

“The visions of Verizon and AOL are shared; the companies have existing successful partnerships, and we are excited to work with the team at Verizon to create the next generation of media through mobile and video.”

The big question now is will other telecoms giants follow Verizon’s lead in terms of acquiring content platforms to take on the established OTT giants like Google and Facebook and win at programmatic advertising?

Tim Armstrong image via Shutterstock

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years