Scott Moritz New York
VERIZON Communications agreed to buy AOL in a deal valued at $4.4 billion (R53bn), getting access to advertising technology that will help it make more money from mobile video.
Verizon, the largest US wireless provider, is buying AOL just as it prepares to start a mobile video-streaming service featuring live TV, original shows and pay-per-view. The carrier would pay $50 a share, a 17 percent premium over AOL’s stock price on Monday, and AOL chief executive Tim Armstrong would continue to lead AOL’s operations after the deal was completed, the companies said yesterday.
By pairing AOL’s so-called programmatic ad technology – which uses high-powered machines to buy and sell ad space – with mobile content, Verizon will get a new revenue stream at a time its main business faces increasing competition from challengers like T-Mobile US.
Advertising technology
AOL has been expanding its role as a provider of ad technology in recent years – further away from its roots as an internet-access provider – and last month unveiled technology that helps marketers decide where to best spend their money, putting it in direct competition with two leading web ad companies, Google and Facebook.
“They want to integrate advertising and content programming with their wireless network,” Roger Entner, an analyst with Recon Analytics in Massachusetts, said. “It’s an ambitious plan, the mobile advertising market is dramatically dominated by Google.”
AOL’s shares jumped as much as 19 percent to $50.70 in early trading, slightly above Verizon’s offer price. Verizon dropped 0.4 percent to $49.60.
AOL today is a much different company from 15 years ago, when it agreed to merge with Time Warner, in what was one of the world’s largest deals, and also the largest takeover failures. Two years after the deal, the value had dropped by two-thirds and the merger ended in a spin-off six years ago. The company, under Armstrong, has since bought sites like the Huffington Post and TechCrunch, and expanded its mobile content.
“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,” Armstrong said in a memo to employees. – Bloomberg