Verizon to purchase AOL for $4.4bn

<p>The deal will strengthen Verizon’s position in mobile video.</p>

US telecoms giant Verizon has announced it is buying AOL in a $4.4 billion (£2.8 billion) deal. The US’s largest mobile player said it was making the move to strengthen its position in mobile video and advertising, gaining access to AOL’s advertising technology and content businesses such as Huffington Post, MovieFone and TechCrunch.

The move comes as global revenue from online video ads is forecast to reach $19 billion by 2017 from about $11 billion last year, according to research firm IHS. Verizon has over 100 million mobile consumers and "a meaningful strategy" in mobile video, AOL’s chairman and chief executive Tim Armstrong said. 

Mobile video 

"AOL's ad-tech offering has been driving its growth for some time now as the internet business has faded," Dan Ridsdale, an analyst at Edison Investment Research, said in a note to clients seen by the Wall Street Journal. "This acquisition is aimed at enabling Verizon to maximise its revenues from mobile video.”

The acquisition comes six years after AOL was split off from media conglomerate Time Warner. In an interview with financial news channel CNBC, Tim Armstrong said the company needed to get bigger to survive amid the consolidation of the media and technology sectors.

"If you look at AOL over the last five years … we turned the company around," he said. "But if you look forward five years, you’re going to be in a space where there are going to be massive, global-scale networks, and there’s no better partner for us to go forward with than Verizon."

Meanwhile, Lowell McAdam, Verizon’s chief executive, said in a statement: "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.”

Tim Armstrong will continue to lead the firm if the deal is approved by regulators.

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.