Verizon Buying AOL for $4.4B in Push to Expand Content

Content is king, and it's so important to Verizon that the company is acquiring AOL for $4.4 billion so it can add its content troves to its other offerings for Verizon customers.

Verizon, AOL, merger

Verizon is bolstering its content and online advertising capabilities with a brash announcement that it is acquiring AOL Inc. for $4.4 billion.

The acquisition, rumored earlier this year, will bring together the largest U.S. mobile carrier and the AOL video and print content network, including the AOL Huffington Post Media Group.

"Verizon's vision is to provide customers with a premium digital experience based on a global multi-screen network platform," Lowell McAdam, Verizon's chairman and CEO, said in a May 12 statement. "This acquisition supports our strategy to provide a cross-screen connection for consumers, creators and advertisers to deliver that premium customer experience."

The deal allows Verizon to buy AOL for $50 per share, with AOL becoming a wholly owned subsidiary of Verizon when it is completed, the companies said. The transaction, which is expected to close this summer, is subject to customary regulatory approvals and closing conditions.

AOL began originally in 1985 as an online communications service called Q-Link, when the company was originally known as Quantum Computer Services. Quantum launched its first instant messaging service in 1989 and introduced that "You've got mail!" announcement that became a core identity of the company, which was renamed AOL, or America Online, in 1991.

Acquisitions have been a large part of AOL's history, including the company's major 2001 merger with cable company Time Warner. In 1998, AOL bought Web browser company Netscape for $4.2 billion, ending Netscape's existence as an independent company.

For Verizon, the deal is all about expanding its content and advertising offerings to its 102.6 million mobile customers and giving them more reasons to keep their services with the company.

"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," McAdam said. "At Verizon, we've been strategically investing in emerging technology … 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."

Tim Armstrong, chairman and CEO of AOL, will stay on to lead AOL's operations after the acquisition is completed, according to the companies.

"The visions of Verizon and AOL are shared; the companies have existing successful partnerships, and we are excited to work with the team at Verizon to create the next generation of media through mobile and video," Armstrong said in a statement.

Large media acquisitions like this one are increasingly common today as companies seek more ways of attracting new customers with increased content that users find valuable. Competitors, including Facebook, are also on the move constantly to find new sources of content that can help them stay one step ahead of competing content and advertising networks. In March, a report surfaced saying that The New York Times, BuzzFeed and National Geographic, among others, are planning to launch a test program to host their content on Facebook, allowing users to read the latest news and feature articles without leaving the social network. Such moves help content sites such as Facebook remain "sticky" and important for users.

Web portals, including AOL, Yahoo, Google and others, have been following similar strategies to remain relevant in a fast-changing online and mobile-centric world so they can grow and sustain their audiences.