Verizon buys into OTT with $4.4bn AOL acquisition

Giant US telco Verizon has agreed to acquire digital content and advertising company AOL for $4.4 billion with an eye on bolstering its mobile video interests.

“Verizon’s acquisition further drives its LTE wireless video and OTT (over-the-top video) strategy,” said the announcement. “The agreement will also support and connect to Verizon’s IoT (Internet of Things) platforms, creating a growth platform from wireless to IoT for consumers and businesses.”

AOL’s biggest media property is the current affairs website Huffington Post, while it also owns tech blogs Engadget and TechCrunch. The company’s legacy dial-up operations still do good business so there should also be a fair bit of overlap when it comes to broadband subscribers

“Verizon’s vision is to provide customers with a premium digital experience based on a global multiscreen network platform,” said Verizon CEO Lowell McAdam. “This acquisition supports our strategy to provide a cross-screen connection for consumers, creators and advertisers to deliver that premium customer experience.

“AOL has once again become a digital trailblazer, and we are excited at the prospect of charting a new course together in the digitally connected world. At Verizon, we’ve been strategically investing in emerging technology, including Verizon Digital Media Services and OTT, that taps into the market shift to digital content and advertising. AOL’s advertising model aligns with this approach, and the advertising platform provides a key tool for us to develop future revenue streams.”

Tim Armstrong, AOL CEO Tim Armstrong will still run the company after the acquisition has completed. “Verizon is a leader in mobile and OTT connected platforms, and the combination of Verizon and AOL creates a unique and scaled mobile and OTT media platform for creators, consumers and advertisers,” he said.

“The visions of Verizon and AOL are shared; the companies have existing successful partnerships, and we are excited to work with the team at Verizon to create the next generation of media through mobile and video.”

It’s telling that Armstrong chose to dwell so heavily on OTT – a term that has little meaning outside the telecoms world. He was presumably asked to focus on this angle by his future boss and it reveals how Verizon perceives AOL. Operators have already been showing signs of adopting an ‘if you can’t beat ‘em, join ‘em’ approach to the dreaded OTT players who highjack their networks and seduce their customers. But this is probably the most significant direct investment in content by a telco and indicates just how central this has become to their overall strategy.

Verizon expects the deal to close this summer and the fact that AOL shares immediately jumped to just over $50 implies the market thinks this is a done deal.