Verizon Buys AOL For £2.8 Billion

US telecommunications giant Verizon is buying AOL for $4.4 billion (£2.8b) in a bid to expand its presence in mobile video and advertising.

Verizon also hopes the deal will also support and connect to its IoT (Internet of Things) platforms, creating a growth platform for consumers and businesses.

In a memo sent out to AOL employees obtained by TechCrunch, AOL CEO Tim Armstrong said that the deal came about after a “long and thoughtful” time period. The memo reads:

“Long and thoughtful”

If there is one key to our journey to building the largest digital media platform in the world, it is mobile. Mobile will represent 80% of consumers’ media consumption in the coming years and if we are going to lead, we need to lead in mobile. Over the last 18 months we set a goal of moving AOL into a leading position in mobile, mobile video, and mobile registered consumers. We are approaching 400 million global consumers, we have built one of the best advertising platforms in the world, and we have one of the most talented teams in the world – and now it is time for us to fully open up the mobile frontier.

Today, we are announcing that the largest and most innovative wireless and cable company – and the one investing the most in high quality mobile content – is acquiring AOL with the strategy of building the biggest media platform in the world. The company is Verizon and the deal will game-change the size and scale of AOL’s opportunity. Just as AOL has propelled The Huffington Post, Adap.tv, TechCrunch, and other companies we have acquired, Verizon will propel AOL and comes to the table with over 100 million mobile consumers, content deals with the likes of the NFL, and a meaningful strategy in mobile video.”

AOL was a pioneer in the early days of the web, signing up more than 20 million dial-up customers, and merging with Time Warner in 2000 in a $183 billion deal.

But after the dot-com bust, AOL was left without Time Warner in 2009, where Tim Armstrong stepped in to take the company in a new direction.

Under Armstrong’s leadership, AOL expanded quickly into advertising technology, as well as creating a plethora of technology news sites such as Engadget and TechCrunch. AOL is also behind The Huffington Post.

Armstrong has said in an interview with The Wall Street Journal that the buyup will “create what I think is the largest mobile and video business in the United States.”

Verizon will be looking to go head to head with new media ad giants Google and Facebook, as well as expand its presence in the smart TV sectors. 2014 saw AOL haul in revenues of $2.5 billion (£1.6m), a 9 percent rise from the 2013, but was struggling to make money on its advertising division.

Lowell McAdam, Verizon CEO, said that Verizon’s vision is to now provide customers with a “premium digital experience”. McAdam said in a statement: “This acquisition supports our strategy to provide a cross-screen connection for consumers, creators and advertisers to deliver that premium customer experience.”

The deal is not expected to close before the end of summer this year, with Armstrong set to lead AOL until that time.

“AOL has once again become a digital trailblazer,” said McAdam. “We are excited at the prospect of charting a new course together in the digitally connected world.”

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