American telecommunications giant Verizon has finalized a deal to acquire Internet pioneer AOL in a $4.4 billion all-cash deal as the wireless carrier puts its future in providing video content for web and mobile phones and hopefully cashing in on online ads, various media said.
AOL CEO Tim Armstrong, who is expected to keep his role despite the merger, said Verizon has offered $50-per-share. Under the deal, Verizon will acquire all of AOL's properties, including Huffington Post, TechCrunch, and Engadget web sites, reported the Irish Examiner.
AOL, which introduced the world to "You've got mail," has been building up on mobile ad technology. The company sees that over the next few years, mobile users will represent at least 80% of all media consumption.
Armstrong told his employees on Monday, "If we are going to lead, we need to lead in mobile. The world is going mobile, and it is going there really quickly." He added that Verizon could easily tap into content providing deals with companies, like the National Football League, and generate income from online ads to be generated from the video contents. After all, Verizon has more than 109 million mobile subscribers giving the company an edge in captive market.
According to the New York Times, Verizon has set its sight on AOL's mobile video and advertising technology to create an important synergy with its own phone and Internet services. It hopes the deal will make its products more appealing to mobile users and online advertisers.
In recent months, advertisers are looking into mobile platforms as consumers are shifting to mobile phones, tablets and laptops to watch videos, including YouTube, sports, music videos, movies, etc.
Verizon hopes to generate billions in advertising revenues from streaming videos.
Kathryn Winsted, a professor at Pace University's Lubin School of Business in New York told the New York Times, "They know that mobile is where it's at if you want to get millennials. They may sell ads, they may sell subscription content, but they need to figure out this market."
Verizon has already laid the groundwork for all this to happen. Verizon chief executive Lowell McAdam made significant investments in video. The company invested significant amount of money at LTE Multicast, a technology for broadcasting live video over its network.
In 2014, Verizon bought the assets and intellectual property of Intel's digital TV division, Intel Media. The previous year, the company acquired content delivery network EdgeCast and video streaming firm Uplink, the report said.
McAdam said in a statement after the AOL deal was announced, "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."
One of the biggest winners in the Verizon-AOL deal is Arianna Huffington and his team of editors, writers and online videographers and anchors at Huffington Post. The Daily Beast reported that Huffington Post is expected to gain from the expected new money that Verizon will pour into the company. And even if Verizon sell, or merge Huffington Post with another media at a rumored $1 billion valuation, Arianna's team is seen to benefit.