Verizon Communications said Tuesday that it plans to purchase AOL for $50 a share, or about $4.4 billion. The deal is expected to help Verizon build out its mobile-video offerings by giving it access to AOL’s digital content and advertising technologies, along with its many media properties: The Huffington Post, TechCrunch, and Engadget are all owned by AOL.
“At Verizon, we've been strategically investing in emerging technology ... that taps into the market shift to digital content and advertising,” Lowell McAdam, Verizon’s chairman and CEO, said in a statement. “AOL’s advertising model aligns with this approach, and the advertising platform provides a key tool for us to develop future revenue streams.”
Verizon’s stock edged down 1 percent in early morning trading. Shares of AOL jumped 17 percent.
Rumors of a Verizon-AOL deal were reported back in January by Bloomberg, which noted that Verizon could use AOL’s ad technology to create a “future online-video product.” At the time, AOL dismissed the reports as untrue. With the now-announced deal, Verizon will also gain AOL’s roughly 2.1 million paying subscribers, which last quarter brought in $182.6 million in revenue. And yes, those are the people who still use dial-up to connect to the Internet.
In an internal company memo sent Tuesday morning, AOL chief executive Tim Armstrong said being acquired by Verizon will allow AOL to “fully open up the mobile frontier.” Verizon, the largest wireless provider in the U.S., at last count said it had about 108.6 million wireless users. “Mobile will represent 80 percent of consumers’ media consumption in the coming years and if we are going to lead, we need to lead in mobile,” said Armstrong, who will stay on as AOL’s CEO. “The deal will game-change the size and scale of AOL’s opportunity.”
What does that proverbial game-change mean for AOL’s media properties? Re/code is reporting that Verizon could potentially spin out HuffPo and the like to a third partner. That possibility would also square with Bloomberg’s initial report, which said it was “unclear” whether Verizon was actually interested in AOL’s media properties. When Armstrong first took over at AOL in early 2009, the company was still operating under Time Warner, which it had acquired in 2000.* Later that year, the disastrous merger finally unwound, with AOL separating into its own publicly traded company. Will history repeat itself with Verizon’s bid? Let’s ask Shingy.
*Correction, May 13, 2015: This post originally misstated that Time Warner acquired AOL in 2000. AOL acquired Time Warner.