I’m kidding! We all know Verizon wants AOL for the its CD printing business.
Okay, joking aside… This deal is about AOL’s content and advertising platform. Verizon has the fat pipes, and it wants to have a slice of the content pie.
Indeed the market was a bit shocked at this announcement, but not necessarily shocked about Verizon making an acquisition. It was the target that astonished market watchers. AOL’s known for bringing millions online via its free CD offers of dial-up access. Now it only has about two million dial-up customers (okay, that’s still surprising), but has since become a content powerhouse, owning prime Web properties such as The Huffington Post, TechCrunch, Engadget, and MapQuest.
Verizon is offering $4.4 billion in cash for AOL. According to the 1Q2015 balance sheet, Verizon has about $5 billion in cash, so this transaction is serious business. The telecom giant has tried its hand at content before: its tech news site SugarString was shut down in December 2014 due to controversies surrounding its editorial policies. It also offered streaming service Redbox Instant in 2012, which was discontinued due to lackluster interest from consumers.
Going solo into the business didn’t work out. A partnership with Redbox fizzled. So the next logical thing to do is to buy into the business through the AOL acquisition.
AOL rode the dot-com wave and weathered the crash. It tried to gobbled up Time Warner and ended up spitting it back out at the cost of a $99 billion write-off. As the old saying goes, “Whatever doesn’t kill you only makes you stronger.” And AOL today is indeed stronger, with its network of popular Web destinations and online ad platform.
The company has proved to be quite resilient, and to Big Red it’s worth $4.4 billion.