This morning it was announced that Verizon Communications Inc. agreed to buy AOL Inc. in an all cash deal worth $4.4 Billion.
AOL boasts a significant advertising business with an estimated $600 million in annual revenue just from online ads. Their online properties include such known giants as The Huffington Post, TechCrunch, Engadget, Makers, and, of course, AOL.com.
AOL’s ability to crank in the ad revenue is a very appealing part of the deal for Verizon, not just because of the money itself. This is because AOL has developed advanced technology for selling ads and delivering high-quality web video, which would go hand in hand with their plans to launch a video service this summer.
What may come as a surprise to many of our readers (or maybe it won’t) is that AOL is still very much in the ISP business because 2.1 million people still use their dial-up service in the United States, which is probably the largest appeal to Verizon.
AOL will become a separate division within Verizon, so AOL CEO Tim Armstrong will get to keep his job. Armstrong told CNN that the AOL/Verizon combination will open growth opportunities for both parties amid the online shift to mobile. He also said that there are no plans for job cuts.
In 2014, AOL generated a revenue of $2.5 billion, which was about 9% higher than 2013 and equated to a profit of $126 million, which hey, is probably more than you thought AOL was making last year.
Armstrong was also quoted as saying, “This gives us a real seat at the table for the future of media and technology” because AOL has ideas, they just don’t have the capital that they once had before the internet bubble burst and a defunct merger with Time Warner. He also believes that this merger of his company and Verizon will, “create what I think is the largest mobile and video business in the United States.” That remains to be seen, of course, but they certainly will have some competition for that title.
The deal is not expected to receive much opposition from regulatory agencies and should close this summer pending their approvals.