Why Verizon purchases AOL in a huge media deal

VerizonAOL has been off the radar for awhile, despite multiple attempts at reinvention. Now, they will likely finally make a comeback thanks to a deal with Verizon, one of the largest mobile providers in the world. Verizon will be purchasing AOL in full for $4.4 billion.

The basis behind the deal appears to be an attempt to step into mobile content and marketing, a natural area of interest for the major mobile service and product provider.

AOL will remain under their brand, which makes sense. Being one of the oldest names from the internet era, and one of the few still remaining after others have become defunct, it would be foolish to wipe out that reputation. But they will be a subsidiary of Verizon, overseeing LTE wireless and OTT video.

There will also be a lot of emphasis on digital advertising, a market that AOL has managed to corner well in spite of their ebbing popularity over the years. That has long since been the main source of income for the company, and offers a valuable opportunity for Verizon to take advantage.

This merger was quite costly, at $4.4 billion, or $50 per AOL share. But given the profitability of their advertising alone, and the increase in viability for online streaming content, it will be worth it.

While I can see why Verizon would want to do this – and why AOL would jump on the chance – I am always nervous when I see these mergers. You have two of the biggest names in tech combining, and Verizon is already well known for its uncomfortable monopoly of the US mobile market.

It is like the Comcast/Time Warner combo. You are just asking for trouble as even more power is given to a company that already has too many.

Verizon has been controversial over the years. They are against Net Neutrality, they have been at the center of the fight against companies like Netflix, and they have powerful lobbying groups looking after their interests (and those of their high-paid CEOs). Merging with AOL is a move to further expand their reach.

With their hopes of establishing a foothold in the world of digital content, their are clawing their way into a whole new industry. Considering their focus in the courts, that can’t be good. They want to dominate a new industry, and they might have just been given the weapon to do so successfully.

Source: Verizon

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