May 12, 2015: This morning, Verizon Communications Inc. offered $4.4 billion to purchase AOL Inc. With the shares of AOL closing today at $50.52, above the $50 bid price, some investors are expecting a higher or competing bid to materialize. So it is too early to say if the deal will go through. But it is still interesting to see what Verizon is planning, and how their strategy contrasts with that at AT&T.
Verizon wants to acquire AOL for its digital media and advertising revenue streams. The announcement is another step in their emerging strategy to focus on delivering more content via over-the-top broadband and mobile networks, while not relying as heavily on the revenues the networks themselves generate.
Lowell McAdam, Verizon chairman and CEO, said: “Verizon’s vision is to provide customers with a premium digital experience based on a global multiscreen network platform. This acquisition supports our strategy to provide a cross-screen connection for consumers, creators and advertisers to deliver that premium customer experience.”
He added, “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.”
In a sharp contrast, last May, AT&T announced their bid for DIRECTV. They made clear that they believed that the key to making money in the telecom industry is in owning and operating the network, not in running contect over it.
Which is the “better” strategy, Verizon or AT&T? I could argue either way. But in 5 years, the answer will be clear.
To see more details on the AT&T acquisition of DIRECTTV, see http://about.att.com/story/att_to_acquire_directv.html
To see more details on the Verizon acquisition announcement, see http://www.verizon.com/about/news/verizon-acquire-aol