U.S. wireless carrier Verizon Communications said it would buy mass media company AOL for $4.4 billion, giving it access to the latter’s fast-growing digital properties, wire news agencies reported Tuesday.
AOL, the publisher of popular news sites such as Huffington Post and Techcrunch, has in recent years also tasted success with an automatic advertising system.
“In a sense Verizon’s acquisition of AOL completes a circle,” said Ian Maude of consulting firm Enders Analysis. “AOL started out providing access to online services before morphing into content and, ultimately, the ill-fated acquisition of Time Warner.” It became free of Time Warner in 2009.
“One way of looking at the deal is that Verizon is buying the 4th largest digital audience in the US for 2 per cent of market cap, once again highlighting the importance and value of access and distribution,” said Mr. Maude.
In recent years, telecom companies have taken a liking for content companies. Verizon’s move is one more example of that.
The most-striking example of that in India came in 2013 when Mukesh Ambani’s Reliance Industries acquired TV18 group for Rs 4,000 crore, which was seen as a move to shop for exclusive content for its 4G foray. Globally, last year, Verizon’s rival AT&T agreed to buy DirecTV, the second-largest pay TV provider in the U.S. for $48.5 billion. In Britain, telecom firms British Telecom and Vodafone have been getting into the content game to offer pay TV. Telecom companies need content, as customers are increasingly consuming content, especially on their mobile phones.
More about ad platform Analysts said they believe the deal was more about the ad platform than the content of the Web sites of AOL.
Mr. Maude asked, “Will AOL, as CEO Tim Armstrong seems to be hinting, focus on video and ad platforms? What does it mean for HuffPo (Huffington Post) and Techcrunch?”
Roger Entner of Recon Analytics, agreed. He said, “I don't think Verizon bought AOL for Huffington Post or TechCrunch. There is a good possibility that Verizon will sell the content part over the next few years”.
Nitesh Patel, an analyst at Strategy Analytics, said the deal points to the trend of advertisers becoming more aware of the need to go mobile.
