Verizon Will Acquire AOL for $4.4B, Mobile Video a Central Reason
A new paragraph in AOL's Wikipedia entry began today, as Verizon announced that it will buy AOL for $4.4 billion in an all-cash transaction. Verizon will pay $50 per share, which The New York Times reported is a 17 percent premium over Monday's closing share price. AOL will become a wholly owned subsidiary of Verizon once the acquisition is completed.
While the two companies might not seem a natural fit, Verizon is looking to AOL to help further its LTE wireless video and OTT (over-the-top) platforms.
Advertising is central to the deal, as Verizon and AOL will combine to create a scaled, mobile-first platform for ads, Verizon reports. AOL brands include The Huffington Post, TechCrunch, Engadget, Makers, and AOL.com. As StreamingMedia.com readers know, AOL has been one of the leaders in creating original premium online video.
Mobile video is the central reason why this union is happening, says IBISWorld industry research analyst Sarah Kahn.
"If approved by regulators, the Verizon-AOL deal is expected to trigger a race among other industry players to invest their capital and research on mobile video consumption and advertising," Kahn said. "In the short-term, Verizon is expected to maintain its position as an industry leader in wireless telecommunication, with AT&T close on its heels, especially with the latter’s attempt to acquire satellite TV provider DirecTV. The advertising and video race to consumers’ pockets has begun"
Following completion, AOL chairman and chief executive Tim Armstrong will remain in his position as the head of AOL.
“The visions of Verizon and AOL are shared,” Armstrong said. “The companies have existing successful partnerships, and we are excited to work with the team at Verizon to create the next generation of media through mobile and video.”
In the "72-Hour Challenge," Verizon and Digiflare created mobile and set-top apps for media organizations at a breakneck pace.
In its yearly look at the state of online video advertising, AOL finds that online video budgets are rising at the expense of TV ad budgets.
The streaming service will launch on iOS and Android on Thursday, providing a millennial-oriented, mobile-first take on OTT video.
With fewer people watching broadcast television, broadcasters have had to increase ad loads to generate revenue. But then ad impact is diluted.
Over 45 lifestyle series will be available for mobile viewing by Verizon customers by the end of this year.
Over half frequently or occasionally watch mobile video while watching a television at the same time, says the IAB.
Under the agreement, AOL will stream clips from multiple NBCU networks on its platforms and the two will co-develop upcoming programming.
Today, AOL debuts its biggest online video experiment yet: Connected, a reality show in which real people document their real lives. We sat down with producer Morgan Spurlock for this exclusive interview.
Online is the better buy, AOL tells video advertisers, because viewers are more likely to pay attention—and it has the numbers to back that up.