Yet another mega merger, or buyout, is taking place. Telecom conglomerate Verizon purchases Internet/email pioneer AOL (America Online) for $50 a share. That’s $4.4 billion. How and why did this happen?
Verizon wants AOL’s content and digital advertising. This deal will give it to them, and a powerful edge in online advertising space. Verizon is the country’s largest Internet provider and wireless carrier. Needless to say their wireless space is increasing. So is the competition from rival telecom companies over video content. The transaction is expected to finish in summer 2015 and by that time, Verizon will totally own AOL, though Tim Armstrong will remain the AOL Chairman and CEO. It seems AOL will get something out of this merger too. Verizon will help AOL compete in a forever changing market. Tim Armstrong discussed the optimism he has of this transaction. He said, “If you look at AOL in the past five years…we turned the company around. But if you look forward five years, you’re going to be in a space where there are going to be massive, global-scale networks…”. ?Armstrong is confident Verizon can help them do this. Is he right?
You must admit, AOL has had quite an odyssey. ?In the 1990s, AOL helped launch a technological revolution. Then they merged with Time Warner and still did well. But by the late 2000s, AOL became a technological punchline. Not even a great-grandmother would’ve been caught with an AOL email address. But starting in 2010, under Tim Armstrong’s leadership, things have turned around. Their stocks are nearly twice as high. They co-own Huffington Post. They’re a legitimate online company again. Now with Verizon, they can put their name out there in the video streaming and advertising race. One could argue this is another mega conglomerate purchasing another mega conglomerate, and more small businesses will be squeezed out. But this story is different. This is a story of AOL going from the brink to a major comeback. And this is another step to that comeback. What do you think of the Verizon/AOL purchase?