Verizon's $4.4B Purchase of AOL: Who Wins, Who Loses
The sale is good news for (almost) everyone.
This story first appeared in the May 29 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.
A wave of 1990s nostalgia has rolled in with Verizon's $4.4 billion planned acquisition of AOL. The purchase of the early Internet provider — remember those blue CD mailers? — is key to the telecom giant's mobile video strategy, says BTIG analyst Walter Piecyk. "Verizon is trying to move into an over-the-top pay TV business with a mobile-first strategy," he adds. "They're looking to monetize that and clearly AOL has some assets on the ad tech side that are attractive to them." The Hollywood Reporter takes a look at who else is cheering (and who might be disappointed) about this deal.
The Verizon CEO proves his company is no boring utility and gains access to AOL's digital ad technology for a fraction of Verizon's worth. The move also comes as Verizon builds its inventory of streaming video offerings for mobile devices.
The editor and entrepreneur could strike gold if AOL sells The Huffington Post, as some expect, for more than $1 billion — more than three times the amount AOL paid for it in 2011. Says one insider, "I can't imagine a future where the content brands like HuffPost or TechCrunch exist long term at AOL."
With a 6.7 percent stake in the company (making him AOL's largest individual shareholder), the former Google executive — who took over at AOL in 2009 — could net nearly $180 million from the sale. Says MediaLink founder Michael Kassan, "He anticipated the market brilliantly, and it's worked."
The investor's $3 billion hedge fund, Starboard Value, had urged Yahoo CEO Marissa Mayer to consider a merger with rival AOL, arguing a combined company would "improve Yahoo's competitive position." Mayer shot that down in January. (Starboard gets points, though, for owning AOL shares.)
This is yet another nail in the coffin of the former Time Warner chief's legacy deal: AOL's $160 billion-plus purchase of Time Warner in 2000, widely considered one of the worst corporate mergers to date.