Fifteen years after its ill-fated tie-up with Time Warner, AOL has agreed to another big merger, this time with Verizon.
The companies announced today that Verizon will acquire AOL for $4.4 billion in cash and debt. Verizon plans to use AOL to help jump start the digital video service it s developing. AOL had become a leader in selling and distributing video ads.
We ve been strategically investing in emerging technology … that taps into the market shift to digital content and advertising, Lowell McAdam, Verizon s CEO, said in a statement. AOL s advertising model aligns with this approach, and the advertising platform provides a key tool for us to develop future revenue streams.
Last year, Verizon purchased OnCue, a streaming video service that was being developed by Intel. The company, which already streams NFL games to its smartphone subscribers, plans to launch a full-fledged streaming video service targeting mobile users this summer.
For AOL, the merger is a quiet echo of the one that served as something of the capstone on the dot-com boom of the late 1990s. In that merger, AOL, then the nation s leading dial-up Internet company and major Web destination, purchased Time Warner for some $183 billion. With the dot-com bust and the transition to broadband Internet access, that deal quickly came to be seen as a boondoggle as the valuation of the combined company and AOL s subscriber base plummeted. Time Warner eventually spun off AOL in 2009.
In recent years, AOL has reinvented itself as a Web publishing company, buying up The Huffington Post and Engadget. But the company has had mixed success. It ended up shutting down hundreds of its Patch local news sites and ended up handing control of the remaining network to an investment firm.
Verizon is one of the two largest mobile phone carriers in the United States, but that business has become increasingly mature and has been marked of late by increasing price competition as the players try to steal customers from one another. It also offers local phone and landline broadband service, mostly on the East Coast.
AOL has been rumored for years to be a merger or acquisition candidate, most frequently in connection with Yahoo, which has a similar business model.
File photo: REUTERS/Rick Wilking
