AOL will become a subsidiary of Verizon
So this just happened. AOL, owner of TechCrunch, is getting acquired: U.S. carrier Verizonsaid in a statement that it is buying the company for $4.4 billion, or $50 per share. We’ve just been sent an internal memo about the deal that we are embedding below.
A bigger push into content and mobile videos
AOL will become a subsidiary of Verizon as part of the deal, overseeing a bigger push into content and mobile video by Verizon.
“Verizon’s acquisition further drives its LTE wireless video and OTT (over-the-top video) strategy,” the carrier said in a statement.
In addition to original content across different platforms like video and written word, and desktop and mobile, there are other assets that could be interesting fits for Verizon.
For starters, AOL has been building up a programmatic advertising business to build up how AOL monetizes alongside newer formats like video and mobile. Currently that business — which is the fastest growing operation at AOL in terms of revenues — is split between ads on AOL-owned sites and third-party sites. Verizon picking this up could potentially further build out both, with the company partnering with the likes of ESPN to develop content and also giving the AOL-owned properties potentially much bigger audiences.
The other area of AOL’s business that is a fit for Verizon is the company’s still-lingering dial-up business, which is remains a big revenue generator for AOL, last quarter pulling in $182.6 million.
That may be a decline of 7 percent compared to a year ago but, as a business that gets almost no investment but continues to run, membership (where the dial-up business sits) is still a majority of the company’s operating income. Verizon could potentially tap these customers for potential switch to broadband and other services on top of that, an area where AOL hasn’t really innovated on its own.
If you recall there were rumors earlier this year that Verizon was eyeing up the company. While Verizon appeared to dismiss the reports at the time, it turns out that it was definitely interested after all.
For what it’s worth, we’d heard the same about Verizon being interested but that there were some sticking points about whether it would buy only a part or all of AOL, which appear to have been put to one side for now.
“The deal means we will be a division of Verizon and we will oversee AOL’s current assets plus additional assets from Verizon that are targeted at the mobile and video media space. The deal will not change our strategy – it will expand it greatly. The deal will give our content businesses more distribution and it will give our advertisers more distribution and mobile-first features. The deal will add scale and it will add a mobile lens to everything we do inside of our content, video, and ads strategy,” Tim Armstrong, AOL’s chairman and CEO, said in the memo.
There are lingering questions about whether it’s an all-in deal for the longer term, or whether certain operations that are not as central to Verizon’s bigger strategy may eventually get offloaded.
AOL will be having an all-hands at 10am Eastern time this morning and we’ll report what comes up there, too.
Armstrong will continue to head up AOL after the deal is completed.
Full memo below, and more to come.
AOLers –
As you have heard me say many times over the last 5 years since we became an independent AOL, we are building toward becoming the largest media technology company in the world. While there are search platforms, social platforms, and commerce platforms, we have built a very meaningful media platform and AOL today is a media platform company powering our brands and the brands of over 30,000 partners.
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.
The decision to enter into an agreement with Verizon was made over a long and thoughtful time period and both companies see significant opportunity to service consumers and customers in a differentiated and exciting way. On a personal level, the decision to go forward with an agreement was predicated on giving our talent the best opportunity to build a multi-decade business that would be deeply growth oriented and aimed directly at the platform shift that video and mobile are offering the world – today and 20 years from now.
There are two important questions you might have at this point in the letter:
1. What does this mean?
2. What does this mean for me (meaning you)?
The deal means we will be a division of Verizon and we will oversee AOL’s current assets plus additional assets from Verizon that are targeted at the mobile and video media space. The deal will not change our strategy – it will expand it greatly. The deal will give our content businesses more distribution and it will give our advertisers more distribution and mobile-first features. The deal will add scale and it will add a mobile lens to everything we do inside of our content, video, and ads strategy.
For you this means growth, it means mobile, and it means compensation that will be equal or better to your AOL compensation. Your benefits will not change in 2015. We will eventually go on Verizon’s benefit plan, but that won’t happen until 2016 or later and we will work with Verizon to make sure the benefits are strong and cover important areas of people’s lives. Your job and what you do on a daily basis should be enhanced by the market opportunity this deal is targeted to capture. The simple answer to the question of “what does this mean for you?” should be, “I just got more resources, more support and more growth opportunity.”
The leadership at AOL is staying and I am staying – enthusiastically, and we made that part of the deal. We have the opportunity to build a unique and globally scaled media technology company with the scale and resources we need to make that happen. Verizon and AOL are very large partners today – in content, in ads, and in the technology. We know their team well and they know our team well. The cultures share very similar values and are both working on very similar ways to do good while doing well. Diversity and women’s leadership are at the top of both companies’ agendas and we look forward to having a consumer and industry impact on those important issues.
The future in front of AOL and the industry requires scale, mobile, and video – and partnerships. In our lifetime, we will see the connection of the world on very large and very fast networks – and to play in that world with our strategy requires us to take the natural steps to secure our ability to shoot for the stars. This deal is aimed at the stars and we are going to pursue the joint vision of building the most significant media platform in the world.
I have been a buyer of AOL over the last 5 years – and that is an investment in one thing – our talent. We have reviewed every hire coming into the company over the last 5 years and we have taken extraordinary risks and faced extraordinary challenges over the last 5 years. There is nothing more meaningful than watching our team turn-around this great company and restoring it to growth when most people had left it for dead.
AOL is back and now we are joining forces with Verizon to build the best media technology company in the world. Let’s mobilize. – TA @http://techcrunch.com/
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