UPDATED 07:52 EDT / MAY 12 2015

NEWS

Verizon acquires AOL for $4.4 billion

Verizon Communications, Inc. has entered an agreement to acquire AOL, Inc. for $4.4 billion.

The deal is reported to have Verizon paying $50 a share for AOL stock, a premium on top of its closing price of $42.59 Monday.

Verizon’s vision

 

“Verizon’s vision is to provide customers with a premium digital experience based on a global multiscreen network platform. This acquisition supports our strategy to provide a cross-screen connection for consumers, creators and advertisers to deliver that premium customer experience,” Verizon Chief Executive Officer and Chairman Lowell McAdam said in a statement.

“AOL has once again become a digital trailblazer, and we are excited at the prospect of charting a new course together in the digitally connected world. At Verizon, we’ve been strategically investing in emerging technology, including Verizon Digital Media Services and OTT, that taps into the market shift to digital content and advertising. AOL’s advertising model aligns with this approach, and the advertising platform provides a key tool for us to develop future revenue streams.”

AOL chairman and CEO Tim Armstrong will remain at the helm of AOL once the deal closes.

Founded in 1985 as a pre-Internet dial-up bulletin board like service, AOL emerged during the first great tech bubble in the 1990s as one of the biggest players in the Internet space, leading during the madness of the time to an ill-fated merger with Time Warner in 2000, which eventually ended when AOL was spun off.

AOL finally shifts strategies

 

AOL famously missed the boom in high-speed Internet access, relying instead on its core-dialup business, which surprisingly even today still has 2.2 million subscribers.

In the second half of the 2000s, AOL strategically shifted its direction to become primarily a digital media company, the core of its business today.

In 2005, it acquired Weblogs, Inc. from entrepreneur Jason Calacanis, the beginning of a long list of content, social and advertising acquisitions that were to come in the following 10 years.

In 2007, it acquired advertising business Advertising.com, followed disastrously by once promising social media network Bebo in 2008 for $850 million.

In 2010, it expanded its content offering by acquiring the TechCrunch network and business, before in 2011 acquiring The Huffington Post for $315 million.

Rumors of a possible acquisition with Verizon first emerged in January 2015, although at the time they were denied, with Chief Executive Officer McAdam saying then only that AOL was one of a number of companies it might be interested in working with as partners.

The creation of the largest mobile and video business in the United States

 

The acquisition makes some sense for Verizon, who had previously said that it was interested in entering mobile content provision in the past, including the introduction of a video service this coming summer.

AOL CEO Tim Armstrong told The Wall Street Journal that the combination of Verizon and AOL will “create what I think is the largest mobile and video business in the United States,” and that it will allow it to compete far more strongly against the likes of Google and Facebook, saying “this gives us a real seat at the table for the future of media and technology.”

The transaction is subject to customary regulatory approvals and closing conditions and is expected to close this summer.

Image credit: Jason Versse/ Flickr/ CC 2.0

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