AOL CEO Armstrong: Verizon deal aims at rising mobile-video audience
The $4.4 billion deal with Verizon Communications (VZ) is really about "mobile and video," AOL (AOL) CEO Tim Armstrong told USA TODAY in an interview Tuesday morning.
"The whole world is shifting to video," Armstrong said, stressing where the companies' future lies.
Verizon and AOL had already teamed up on some initiatives, but in the last couple of months, the two sides realized "that there was a lot of shared vision."
Verizon has sponsored AOL's Makers series, which uses short-form video to tell the stories of famous women such as Hillary Clinton and Oprah Winfrey. Verizon has also bought some of AOL's original programming.
"There is a lot of opportunity" with this partnership, Armstrong said, adding that "Verizon has 1.5 billion connected devices in the world."
On Tuesday morning, Verizon announced it had agreed to buy AOL for an estimated $50 a share. The deal values AOL at 17% more than the price the stock closed at on Monday, which was $42.59.
Armstrong, who is also AOL chairman, will continue to oversee AOL operations after the deal with Verizon closes. The companies say the transaction should be completed this summer.
The strategic focus on video comes as that platform has grown into a huge draw for advertisers. U.S. digital video ad spending is expected to increase 30% this year to reach $7.7 billion, according to industry tracker eMarketer.
"This is really about AOL's advertising platform," says Roger Entner, an industry analyst at Recon Analytics. "It's one of the few working video advertising platforms out there."
Entner adds that Verizon got that asset "for a relatively cheap price."
AOL's advertising platform "provides a key tool for us to develop future revenue streams," Verizon CEO Lowell McAdam said in a news release.
The last major match-up for AOL came in 2011, when it said it would pay $315 million for the Huffington Post. When asked about the Huffington Post on Tuesday, Armstrong says this deal will give that unit bigger scale and more resources.
Contributing: Roger Yu