Verizon and AOL have reached a $4.4 billion buyout agreement (worth
$50 a share) that will give Verizon control of AOL’s advertising platform, and several websites including: the Huffington Post, Techcrunch, Engadget, Makers, and AOL.com. The assets Verizon will gain also includes AOL’s dial-up subscription business.
Current AOL chief executive Tim Armstrong will continue to lead the company once the deal is complete. When asked about the merger Armstrong had this to say: “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.”
Verizon wants to use the acquisition to create a “scaled, mobile-first platform” by using AOL’s advertising technology. In 2014 AOL had 0.74% of the
$145 billion global digital advertising market according to marketing firm data eMarketer. Google was the market leader with 31.4% followed by Facebook with a modest 7.9%. Some experts have voiced their approval of the deal such as Forrester analyst James McQuivey who says: “With this move, Verizon will become a global media player, extending its reach to hundreds of millions more people than it could in its current business, at a much lower cost than trying to acquire a different network provider,”
If you’re wondering why this deal is taking place you’re not alone many people have been asking that very question. The answer is in the statement Verizon chairman and CEO Lowell McAdam issued recently, he says: “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.” The key thing to notice here is OTT. OTT stands for Over the Top, which is an industry term that refers to the way people are preferring to get their video from the internet as opposed to the traditional TV method, in other words they’re going “Over the Top” of TV. With content streaming websites like Netflix and Hulu growing in popularity, the number of OTT viewers are expanding at a rapid rate, and as the number of OTT viewers grows the advertising world must adapt.
Also growing in popularity is the amount of people watching video content directly on their phones. In 2012 the amount of people watching video on their phones increased by 167%, then in 2013 it increased again by 175% to see how those numbers compare, the number people watching video content on their computers was up by 75% in 2012 and only 5% in 2013. Another thing to
note was the number of people watching video content on TV in 2013 that number was down 3% proving that people are moving towards online streaming.
With this acquisition Verizon has made a solid investment in both the advertising market, and the future of digital media.
