Despite CEO Tim Armstrong's denial of rumors about the deal earlier this year, AOL has announced that it is being bought by Verizon for $4.4 billion dollars. What does this mean for AOL's publishing subsidiaries like The Huffington Post?
Following the deal, AOL's content business - which includes The Huffington Post, TechCrunch and Engadget - could well be sold off to a third party, possibly German publisher Axel Springer.
When Peter Kafka of Recode put the rumors to Armstrong, who will stay on as AOL chief after the takeover, he didn't discuss the spin off directly but his answer suggested it's certainly a real possibility. "We've spoken to partners about content and scaling," Armstrong said. "Obviously, we've seen a lot of interest in the content brands we have. So over the course of the summer, stay tuned."
And when speaking to CNBC, Armstrong also said that The Huffington Post could be "one of the biggest winners out of this deal." AOL bought the online news site for $315 million in 2011.
It looks like Verizon is primarily buying AOL for its advertising business rather than the online publishing side. "At Verizon, we've been strategically investing in emerging technology, including Verizon Digital Media Services and OTT, that taps into the market shift to digital content and advertising," Lowell McAdam, Verizon chairman and CEO, said in a press release. "AOL's advertising model aligns with this approach, and the advertising platform provides a key tool for us to develop future revenue streams." OTT, or over-the-top content, refers to delivery of audio, video, and other media over the Internet (think Hulu, Netflix, HBO) with the Internet service provider just providing delivery services.
Verizon and AOL combined will be comparable with the likes of Google and Facebook in terms of online advertising. Verizon's network will provide access to millions of mobile customers and AOL has the ad technology, particularly in video advertising, to help build the business. "I think you're going to see things like private marketplaces and programmatic [ads] basically make mobile shine, and I'm hoping the shiniest company in the mobile space is going to be the combination of Verizon and AOL," Armstrong told CNBC.
Axel Springer, as one of the biggest publishers in Europe, would be well-placed to make a bid for the content business. The company owns German flagship newspapers Die Weld and Bild, as well as the German version of Rolling Stone, and is already invested in online U.S. media such as Business Insider.
Verizon will pay $50 a share for AOL, which will total an estimated $4.4 billion in the deal announced today, May 12. AOL will become a wholly owned subsidiary of Verizon upon completion of the deal, which is expected to happen this summer. Armstrong has been CEO of AOL since shortly before it was spun out as an independent company from Time Warner in 2009 at a value of $3.4 billion.
