Verizon Communications announced Tuesday official plans to buy AOL, Inc. in $4.4 billion cash deal that will merge the nation’s largest wireless provider with the once dominant internet-media provider.
Rumors of the deal first surfaced in January, but the companies maintained nothing serious was in the works. But an internal memo from AOL CEO Tim Armstrong to employees Tuesday said the Verizon deal is part of a “strategy of building the biggest media platform in the world.”
“We are approaching 400 million global consumers, we have built one of the best advertising platforms in the world, and we have one of the most talented teams in the world — and now it is time for us to fully open up the mobile frontier,” Armstrong said in the memo.
“Today, we are announcing that the largest and most innovative wireless and cable company — and the one investing the most in high quality mobile content — is acquiring AOL with the strategy of building the biggest media platform in the world.”
The deal would give Verizon ownership of AOL’s media outlets including the Huffington Post, TechCrunch, Engadget, and women-focused video news site MAKERS . The acquisition is more than a veritable replacement for Verizon’s failed attempt at tech media. The broadband carrier recently shuttered its controversial tech news site Sugarstring following criticism of the site’s refusal to cover stories on net neutrality or government surveillance.
Verizon would also get access to AOL’s growing ad and marketing businesses. AOL has steadily invested in premium programmatic ad technology through recent acquisitions of Adap.tv, Vidible and Convertro. The acquisition reportedly brings the merged company’s ad reach to 70 percent of internet traffic, rivaling Facebook and Google, according to Business Insider.
“Verizon will propel AOL and comes to the table with over 100 million mobile consumers, content deals with the likes of the NFL, and a meaningful strategy in mobile video,” Armstrong wrote. “The deal will add scale and it will add a mobile lens to everything we do inside of our content, video, and ads strategy.”
AOL has over 2 million paid dial-up internet subscribers — that will likely be converted to a Verizon service — and owns several online media outlets that garner nearly 200 million unique monthly visitors. Verizon has been boosting efforts to gain footing in online content, advertising and mobile video space.
Another perk Verizon gets out of the AOL deal is the potential to broaden it’s TV offerings with more internet and mobile-based content through standalone services like Netflix, Hulu or HBO Go that don’t require a cable package subscription.
AOL has been floundering on its own, with major stock drops, lackluster sales, and a reorganization of its ad business that resulted in 150 layoffs earlier this year. News of the Verizon deal has had a redeeming effect, however, with AOL stocks climbing 18 percent since the story broke.
Once the deal is complete, AOL will become a division of Verizon and combined with Verizon’s own mobile and video ventures. AOL’s leadership won’t change and Armstrong will remain at the helm. For AOLers, it means salaries “equal or better” than current compensation, a new benefits plan, and “more resources, more support and more growth opportunity,” Armstrong reassured.
There’s speculation that Verizon would spin off the Huffington Post, which AOL bought in 2011 for $315 million. Armstrong hasn’t directly addressed what will happen with its content sites but told Business Insider “We’ve seen a lot of interest in the content brands we have. So over the course of the summer, stay tuned.”