Verizon to purchase AOL for 4 4bn

The deal will strengthen Verizon’s position in mobile video.

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By :  ,  Financial Analyst

US telecoms giant Verizon has announced it is buying AOL in a $4.4 billion (£2.8 billion) deal. The US’s largest mobile player said it was making the move to strengthen its position in mobile video and advertising, gaining access to AOL’s advertising technology and content businesses such as Huffington Post, MovieFone and TechCrunch.

The move comes as global revenue from online video ads is forecast to reach $19 billion by 2017 from about $11 billion last year, according to research firm IHS. Verizon has over 100 million mobile consumers and "a meaningful strategy" in mobile video, AOL’s chairman and chief executive Tim Armstrong said. 

Mobile video 

"AOL's ad-tech offering has been driving its growth for some time now as the internet business has faded," Dan Ridsdale, an analyst at Edison Investment Research, said in a note to clients seen by the Wall Street Journal. "This acquisition is aimed at enabling Verizon to maximise its revenues from mobile video.”

The acquisition comes six years after AOL was split off from media conglomerate Time Warner. In an interview with financial news channel CNBC, Tim Armstrong said the company needed to get bigger to survive amid the consolidation of the media and technology sectors.

"If you look at AOL over the last five years … we turned the company around," he said. "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, and there’s no better partner for us to go forward with than Verizon."

Meanwhile, Lowell McAdam, Verizon’s chief executive, said in a statement: "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.”

Tim Armstrong will continue to lead the firm if the deal is approved by regulators.

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