Verizon Communications sent a press release announcing that they would be buying AOL Inc for $4.4 billion and paying in cash. The telecom company is looking to use AOL’s video platforms to expand into the highly competitive but wildly popular mobile video market, as well as venture into advertising.
Each share is valued at $50, a welcomed 23 percent premium over the company’s three-month, volume-weighted, average price. The final change was influenced by timing – the morning that the trade took place AOL shares rose 18 percent to $50.18, while Verizon shares fell 1.7 percent to $48.98.
Lowell McAdam, Verizon chairman and CEO, gave a statement saying that the company’s vision is to provide their customers with a digital premium experience based on a global multiscreen network platform.
The acquisition of AOL further supports their strategy to provide a cross-screen connection for consumers, creators, and nonetheless advertisers to deliver the well-known and highly valued premium customer experience.
Indeed, by buying AOL, Verizon will gain access to advanced technology developed by AOL for selling ads and for streaming high-quality web videos.
John Stratton, Verizon’s president of operations, also narrows down the reason for the merge, overtly admitting that even though it has more than one benefit, the ad platform was always the main priority for the company: “Certainly the subscription business and the content businesses are very noteworthy. For us, the principal interest was around the ad tech platform”.
The newly acquired business opportunity and ability to deliver high-quality videos over wireless connections is not to be overlooked as Verizon has already announced that they’re going to launch a video service focused on smartphones and tablets sometime this summer.
One could assume Verizon already has plans into motion and intends to waste no time profiting from the partnership, as sometime this summer is exactly when the two companies expect to finalize the deal.
Verizon Communications has yet to offer any significant details about the project, however Fran Shammo, chief financial officer, did share last month that the service will offer a mix of paid, free and ad-supported content.
Shammo also insisted that it will not try to replicate traditional TV. He explained that the service will not stream 30 to 60 minute show, but focus on shorter clips instead. It might even include multicast programming for delivering live concerts and sports events, as well as on-demand viewing for those interested.
The main target of the service seems to be the tech savvy millennials as Shammo clarified that the service “will have nothing to do with what you do in your house. Millennials consume news in ways you can’t even see on the TV”.
And Verizon seems to be dead set on making a lasting name in the industry as they already have significant relationships with many media providers thanks to their FiOS TV services.
AOL is no stranger to innovation and change either, as the company started out in the dial-up web access industry and went on to have a strong presence in the digital marketing and media industry.
AOL’s chief executive, Tim Armstrong, also gave an interview, proudly stating that the merge between the two companies will create the largest mobile and video business in the US.
Image Source: thewrap.com