Verizon Bets Big on Mobile Content Delivery, Acquires AOL for $4.4 Billion

by Matt Klassen on May 13, 2015

As evidence that that the telecommunications landscape is changing rapidly, Verizon announced this week its intention to purchase AOL for a cool $4.4 billion. The move comes as telecom providers search for new ways to control, and thus profit from, the content flowing through their data pipes. By acquiring AOL, once a benchmark of the online world, Verizon clearly intends to develop a mobile-focused content delivery platform, attempting to capitalize on the advertising dollars associated with such content.

While the AOL today is a far cry from the once bright luminary it was in the early days of the Internet–the once mighty behemoth now barely an afterthought for many Web users– it does still have a “stable of Web publications” and “packs some video savvy as well,” which Verizon clearly wants to use to compete with the tech industry for your online dollars.

By packaging what AOL brings to the table with the company’s mobile empire and its current content offerings (like its Fios cable service that couples TV and phone services) Verizon will be able to offer a unified multi-platform experience, uniquely marrying services and content in ways virtually never before seen in tech and telecom.

While traditionally there have been sharply demarcated lines between tech and telecom, over recent years we’ve seen a blending of the two industries, with tech companies like Google becoming telecom service providers and now with Verizon, telecom companies looking to become content providers as well.

As mentioned, with mobile growth prospects waning and telecom companies like Verizon tired of simply being the “dumb pipe” that delivers others’ content and makes others money, the acquisition of AOL is simply the next evolution for the telecom industry as companies look for ways to jump-start growth and establish new revenue streams.

“Verizon’s vision is to provide customers with a premium digital experience based on a global multi-screen network platform,” said Lowell McAdam, Verizon’s chief executive. “This acquisition supports our strategy to provide a cross-screen connection for consumers, creators and advertisers to deliver that premium customer experience.”

This acquisition, however, also underscores the widening gap between the approaches AT&T and Verizon are taking to this changing market. “While [AT&T] believes there is a greater need to own more physical infrastructure (through DTV),” Wells Fargo Securities analyst Jennifer Fritzsche wrote in a note to investors Tuesday, “[Verizon] is building up more assets to strengthen its ‘mobile first’ OTT initiative with advertising playing a key role.”

Simply put, Verizon’s acquisition of AOL will help bolster the company’s mobile-first content delivery strategy, one where Verizon will offer its customers a veritable one stop shop of communication services and content; the first step in the ongoing evolution of the telecommunications industry.

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