Verizon today announced that it is buying AOL for about USD 4.4 billion in a deal that will bolster US telecom giant’s presence in online media and advertising.
AOL (previously known as America Online) is an American multinational mass media corporation based in New York City which develops, grows, and invests in brands and web sites. The company’s business spans digital distribution of content, products, and services, which it offers to consumers, publishers, and advertisers.
AOL also happens to be the owner of The Huffington Post, TechCrunch and Engadget. It also has a subscription business and produces original video content.
Verizon announced that it is paying $50 per share of AOL. Post the announcement, AOL shares rocket boosted by almost 18 per cent in pre-market trading to $50.22. However, Verizon shares witnessed a dip post the announcement, falling as much as 1.5% in pre-market trade.
Verizon chairman and chief executive Lowell McAdam said in a statement-
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.
Verizon said that the deal is to be funded from cash in hand and commercial paper and is subject to regulatory approvals and closing conditions and is expected to close in the coming months.
Tim Armstrong, AOL’s chairman and CEO, said in the memo-
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. The deal will not change our strategy – it will expand it greatly. The deal will give our content businesses more distribution and it will give our advertisers more distribution and mobile-first features. The deal will add scale and it will add a mobile lens to everything we do inside of our content, video, and ads strategy.
A couple of reason are being attributed to the announcement of this deal. Firstly, AOL has a host of well-known content play through Huffington Post, Engadget, Techcrunch and Stylelist, which attracts a lot of user traffic.
AOL also has a powerful advertising technology platform. AOL offers technology tools for buyers, sellers and analytics, which is undoubtedly growing at a faster rate.
Verizon had also indicated that it wants to become big in the digital video service space especially with regard to mobile video. AOL would surely become a helping hand in this regard as it knows all about monetising on this front.