Alex Sherman and Scott Moritz New York
VERIZON Communications had approached AOL about a potential acquisition or joint venture with the internet firm to expand its mobile-video offerings, people with knowledge of the matter said yesterday.
The people, who asked not to be named because the discussions were private, said that Verizon had not made a formal proposal to AOL, and no agreement was imminent.
Verizon is primarily interested in AOL’s programmatic advertising technology – the automated buying and selling of ads online – which two people said could be paired with a future online-video product.
Internet properties
With a takeover it would also gain internet properties including The Huffington Post and subscribers who paid for internet access.
AOL ended trading on Monday with a market value of about $3.5 billion (R41bn) and rose as much as 13 percent after the close of regular trading in New York. In German trading yesterday, the stock climbed 11 percent to the equivalent of $49.52 as of 9.22am in Frankfurt. Verizon’s market value is about $193bn.
Spokesmen for Verizon and AOL declined to comment.
Just a few years after AOL’s failed marriage with Time Warner ended in its spin-off, chief executive Tim Armstrong has transformed the web portal into a different firm.
A venture would allow Verizon to focus on advertising technology as the company sought expertise in three areas: online content, mobile video and advertising, one person said. The company has also held talks with several of AOL’s peers about how to bolster those businesses.
Researcher EMarketer projected in July mobile advertising would lead 2014’s rise in total media ad spending in the US, with advertisers spending 83 percent more on tablets and smartphones than they did in 2013 – an increase of $8.04bn.
Verizon is looking to catch up with AT&T as wireless providers enhance their offerings. AT&T last year struck a $48.5bn deal to acquire satellite TV provider DirecTV.
In a takeover, Verizon would also gain AOL’s 2.3 million paying members, in addition to internet brands including the Huffington Post, TechCrunch and Engadget.
It is unclear if Verizon is interested in those media properties, which draw more than 200 million unique visitors a month, the fourth-most in the US, behind Google, Yahoo and Facebook, according to November data from researcher ComScore.
Once known for its “You’ve got mail” notification to consumers, AOL was one of the main portals through which people first accessed the internet.
Spin-off
Its trajectory peaked with a now infamous $124bn combination with Time Warner 15 years ago, after which it began losing customers to faster services from telephone and cable-television carriers. After years of losses the merger was unwound with a spin-off in late 2009.
Some of AOL’s members still use its dial-up internet service, though the company is winding down that business.
If Verizon acquired the New York-based company, it could continue that process and convert some of those customers to its FiOS broadband service, one of the people said.
Verizon is dedicating three executives to help develop a mobile-video service and integrate acquired technology, known as OnCue, from Intel last year and EdgeCast Networks in 2013. – Bloomberg