Verizon dials up its €4bn AOL connection
Published 13/05/2015 | 02:30
Verizon Communications agreed to buy internet provider AOL in a deal valued at $4.4bn (€3.9bn) getting access to advertising technology that will help it make more money from mobile video.
Verizon, the largest US wireless provider, is buying AOL just as it prepares to start a mobile video streaming service featuring live TV, original shows and pay-per-view.
The carrier will pay $50 a share, a 17pc premium over AOL's stock price on Monday, and AOL chief executive Tim Armstrong will continue to lead AOL's operations after the deal is completed, the companies said yesterday in a statement.
By pairing AOL's so-called programmatic ad technology - which uses high-powered machines to buy and sell ad space - with mobile content, Verizon will get a new revenue stream at a time its main business faces increasing competition from challengers like T-Mobile US.
AOL has been expanding its role as a provider of ad technology in recent years - further away from its roots as an internet-access provider - and last month unveiled technology that helps marketers decide where to best spend their money, putting it in direct competition with leading web ad companies, Google and Facebook.
"They want to integrate advertising and content programming with their wireless network," Roger Entner, an analyst with Recon Analytics based in Dedham, Massachusetts, said of Verizon.
"It's an ambitious plan. The mobile advertising market is dramatically dominated by Google." AOL's shares jumped as much as 19pc to $50.70 in early trading, slightly above Verizon's offer price. Verizon dropped 0.4pc to $49.60.
AOL today is a much different company now from 15 years ago, when it agreed to merge with Time Warner, in what was one of the world's largest deals, and also the largest takeover failures. Two years after the deal, the value had dropped by two-thirds and the merger ended in a spin-off six years ago. The company, under Mr Armstrong, has since bought sites like the Huffington Post and TechCrunch, and expanded its mobile content.
"The deal means we will be a division of Verizon and we will oversee AOL's current assets plus additional assets from Verizon that are targeted at the mobile and video media space,"
Armstrong said in a memo to employees. "The deal will add scale and it will add a mobile lens to everything we do inside of our content, video, and ads strategy."
In a saturated wireless market in the US, Verizon is battling for customers with smaller and more nimble rivals like T-Mobile.