Menu Menu

Verizon Wireless Acquires AOL For $4.4 Billion

Verizon Wireless Acquires AOL For $4.4 Billion

The Big Red has just officially announced that it is acquiring AOL for an amount of $4.4 billion (equivalent to $50 a share). Essentially, AOL will turn into a subsidiary company under Verizon Wireless, making it possible for the industry leading wireless carrier to aggressively push into the content and mobile video market.

 

This has been more or less confirmed by Tim Armstrong, the chairman and chief executive officer of AOL. Via a memo, Armstrong stated that the acquisition deal will mean that AOL will become a division of Verizon Wireless, and will oversee its own current assets, as well as those brought forth by Verizon, in venturing into the world of video and mobile. Armstrong added that basically, AOL's thrust is the same, the only difference is that Verizon Wireless has now given AOL scale and some expertise and know-how in applying mobile technologies to content and mobile video.

 

Apart from taking control of AOL's original content (AOL.com, Huffington Post) delivered across various platforms like such as video and written media, desktop, and of course, mobile, Verizon Wireless has also gotten itself access to other assets that it could fully make use of. 

 

For example, AOL has been working on developing a programmatic advertising segment in order to boost its income generating initiatives in video and mobile formats. This segment is currently the most promising of AOL's in terms of revenue generation, and is split between advertisements placed on websites owned by AOL and those that appear on website owned by third parties. Now that this is in Verizon's hands, this project could be further expanded, with the carrier partnering with other business entities, like ESPN for example, in producing content and delivering it to a wider market.

 

Then there is AOL's dial up division, which still remains a formidable cash generating part of AOL's business. As a matter of fact, this segment managed to generate $182.6 million during the last quarter. Customers who still avail of the services of this segment could be enticed by Verizon Wireless to make the switch to broadband, plus other services.

 

However, some wonder may wonder what will happen to AOL assets that Verizon Wireless may not find crucial to its overall objectives. The answer to that may not be clear yet.

 

But this acquisition deal should serve as a much needed shot in the arm for AOL. When consumers started to switch from dial up (the core of AOL's business then) to broadband, the company found itself rapidly losing ground. It agreed to a merger with Time Warner in 2000, but the deal ultimately did not work out. Although AOL has since stabilized in recent years by focusing on content, it is no longer as big as it was in the 1990s. Being acquired by Verizon Wireless now could provide AOL with a fresh new start.

Section: