Verizon Communications Inc is buying AOL Inc in a $4.4 billion bet that a push into mobile video and targeted advertising can help the biggest US telecommunications company find new growth avenues. AOL and its properties, including the Huffington Post, TechCrunch and Engadget websites, would become a Verizon subsidiary, with AOL Chief Executive Officer Tim Armstrong staying in his job. The companies announced the deal on Tuesday.
Armstrong, who has been building up AOL's expertise in technology for placing text and video ads on mobile phones, sees mobile representing 80 percent of media consumption in coming years. "If we are going to lead, we need to lead in mobile," Armstrong said in a memo to employees on Tuesday.
Global revenue from online video ads is forecast reaching $19 billion by 2017 from about $11 billion last year, cutting into television ad revenue, according to research firm IHS. Verizon has over 100 million mobile consumers, content deals with the likes of the National Football League and "a meaningful strategy" in mobile video, Armstrong said. It will need to buy telecommunications spectrum aggressively to accommodate rising mobile video traffic. For Wall Street, the deal is about the technology. "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. "This acquisition is aimed at enabling Verizon to maximise its revenues from mobile video."
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