The Strategist

Verizon buys AOL for $4.4 billion

05/13/2015 - 04:53

Verizon buys AOL for $4.4 billion
US-based telecom and broadband giant Verizon has bought erstwhile Internet company AOL for $4.4 billion at $50 a share.
Verizon has amassed AOL’s online video data as part of this deal and is looking it as an opening gate to get into digital video ads. While Verizon’s traditional business of carrier services has got a hit with the US government imposing regulations in the pricing, this deal may help the company to monetize through digital ads. The deal may be closed by the end of summer with all regulatory approvals.
Lowell McAdam, Verizon chairman and CEO, said in a press release that the merger will help "provide a cross-screen connection for consumers, creators and advertisers to deliver that premium customer experience." He noted that AOL has once again become a digital trailblazer, and that they are excited at the prospect of charting a new course together in the digitally connected world. “AOL's advertising model aligns with this approach, and the advertising platform provides a key tool for us to develop future revenue streams," he further said.
AOL CEO Tim Armstrong noted that the company will not change its name or brands due to the merger. All the employees will be retained and the company will work as a standalone division within Verizon, he noted. The deal comes 15 years after AOL merged with Time Warner in 2002, which resulted in a $98.7 billion loss. The combined company was forced to write down the value of AOL, creating the biggest annual company loss in history.
Verizon also plans to launch a new streaming service in its mobile devices next month with advertising as the sole source of revenue through the service. Subscriptions and probably more data usage to get access to the service may be other ways to get money out of the service.
The company earlier in the year announced that it may not make large spectrum acquisitions after getting around $10.4 billion worth of licenses in government auction. Meanwhile, it also silently sold around $10.5 billion worth of wireless assets to Frontier Communications that month.