Verizon to Buy AOL for $4.4 Billion to form U.S.’s Second-Largest Mobile Carrier

Verizon said in a statement that the acquisition “further drives its LTE wireless video and OTT (over-the-top video) strategy” and “will also support and connect to Verizon’s IoT (Internet of Things) platforms, creating a growth platform from wireless to IoT for consumers and businesses.”

It would also give Verizon the coveted technology that AOL has developed for placing online ads, a technology that analysts says now accounts for the bulk of its value.

AOL is a leader in the digital content and advertising platforms space, and the combination of Verizon and AOL creates a scaled, mobile-first platform offering directly targeted at what eMarketer estimates is a nearly $600 billion global advertising industry. AOL’s key assets include its subscription business; its premium portfolio of global content brands, including The Huffington Post, TechCrunch, Engadget, MAKERS and AOL.com, as well as its millennial-focused OTT, Emmy-nominated original video content; and its programmatic advertising platforms.

Verizon has yet to provide much detail about the online video service it’s planning, but company executives have said it will combine a mixture of paid-for and ad-supported content. Verizon is paying $50 a share for AOL, a 23% premium over the company’s three-month volume-weighted average price. AOL shares had lost 8% over the first five months of the year.

Verizon CEO and chairman Lowell McAdam said in a statement that “AOL has once again become a digital trailblazer, and we are excited at the prospect of charting a new course together in the digitally connected world. 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. AOL’s advertising model aligns with this approach, and the advertising platform provides a key tool for us to develop future revenue streams.”