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AOL Acquisition Could Boost Verizon's Free Netflix Competitor

Today, Verizon announced that it intends to purchase AOL Inc. for $4.4 billion. Verizon seems to believe that this deal should strengthen its OTT (Over the Top) strategy and help it diversify away from being only a wireless provider.

Lowell McAdam, Verizon chairman and CEO, said: "Verizon's vision is to provide customers with a premium digital experience based on a global multiscreen network platform. This acquisition supports our strategy to provide a cross-screen connection for consumers, creators and advertisers to deliver that premium customer experience."

Late last year, Verizon tried to get into the content business with a new technology news-focused website called Sugarstring. It's not clear what Verizon's strategy was at the time, because the company quickly shuttered it soon after rumors appeared online that Sugarstring writers would not be allowed to talk about the NSA's domestic surveillance activities or net neutrality.

Perhaps Verizon realized that it was simply thinking too small then and that a brand new homegrown website wouldn't have had too much success or credibility. Soon, Verizon will own some large media brands such as Engadget and Techcrunch (Huffington Post will apparently be spun off) that already have an established readership.

If Verizon was willing to completely ban certain technology hot topics that didn't put it in a good light from its Sugarstring site, it will be interesting to see if Verizon ends up doing the same with its AOL properties. However, as a large U.S. carrier that's tied to the explosive mobile industry, Verizon's businesses and actions will continue to come up in the news cycle whether the company likes it or not. Therefore, such actions may prove futile and even counter-productive.

For now, though, Verizon seems more interested in expanding its business portfolio than meddling with the news about the company. As the Internet increasingly becomes the only type of medium people use for consuming content, and its customers start using Voice and Text plans less and less, Verizon may fear that it will eventually get completely commoditized. Verizon, and other carriers, don't want to eventually compete on a "per GB" price.

Many billion dollar businesses have been built on the Internet, and Verizon wants to own or create a few of those, too. For instance, AOL is third only to Google and Facebook in terms of the people it reaches with online video (seriously!) and Verizon is planning a video streaming service of its own. By acquiring AOL, Verizon can reach many more people, which can help its OTT video streaming service explode almost overnight.

Verizon seems to want to offer this streaming service for free, monetized through ads, which is another area in which AOL can help the company. AOL has a large ad platform for its own content, and it could expand that platform to cover Verizon's own streaming business, too. That means it should be easier for Verizon to find advertisers for its shows, which could keep the streaming business profitable, even if it was offered to users for free. If Verizon's ad-based streaming service is profitable enough to get good and original shows, it could become the free Netflix competitor that Hulu never was.

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Lucian Armasu
Lucian Armasu is a Contributing Writer for Tom's Hardware US. He covers software news and the issues surrounding privacy and security.
  • thundervore
    This is getting ridiculous, these companies complain about not getting enough profit so they screw over their customers with nickel and dime tactics.

    Comcast was going to buy Time Warner.
    Time Warner is partnered with AOL
    If Verizon buys AOL, they gain all those online subscribers in the 40+ age range then things get strange.

    Im waiting for the day the government steps in again and breaks up these companies like they did to the phone companies back when there was basically only MCI
    Reply
  • lpedraja2002
    It's pretty amazing how AOL still has any relevance whatsoever in todays age.
    Reply
  • razor512
    They just wanted that 100% profit margin on those 2+ million dialup subscribers who are not even using the service :)

    That is a 6 year ROI on just the dialup users alone. Their ad network will turn even more money in, as those people paying for AOL dialup while running the crappy AOL software will be looking at all of those bandwidth hungry obnoxious ads that they will load using their cable or fios service.
    Reply
  • balister
    This is getting ridiculous, these companies complain about not getting enough profit so they screw over their customers with nickel and dime tactics.

    Sadly, this is general business all over, it's especially bad in the airlines. What it's going to boil down to is customer telling the businesses that they're not going to buy and basically boycott the businesses to get this attitude to change.

    Comcast was going to buy Time Warner.
    Time Warner is partnered with AOL
    If Verizon buys AOL, they gain all those online subscribers in the 40+ age range then things get strange.

    AOL and Time Warner merged years ago, then when things started going bad, Time Warner spun off their cable division and AOL. This is why Time Warner Cable was partnered with AOL. When ComCrap decided to try to buy TWC, then everyone and their brother jumped in and said wait a second (rightfully so) and the deal got killed. It's unlikely that Verizon and AOL will get nixed like the ComCrap/TWC deal because there's no chance for monopoly with this deal (Verizon and AOL don't really go after the same customers and Verizon has been wanting to get into the content side of the house for a while now to leverage FiOS even more along with content on the Wireless side as well). So, most likely, what will happen is either TWC will not partner with AOL/Verizon in the future or it will be limited.

    Im waiting for the day the government steps in again and breaks up these companies like they did to the phone companies back when there was basically only MCI

    You mean AT&T. And the baby Bells have already started to reform back into the monopoly they were. They're not completely back into one entity, but they're are about 3 to 4 now that are monopolies over specific areas of the US (like QWest in Pacific and Intermountain region, basically New Mexico, Colorado, Wyoming, Montana and westward of those states, the one that is in the Southern US, the one that covers the Plains and Midwest of the US and the last that covers New England and the Eastern seaboard down to Virginia).

    And funny that you would say MCI, because MCI was bought by Verizon when it filed for Bankruptcy as World Com.
    Reply
  • Addonic
    What they are doing is turning the internet into a subscription based platform.... like, cable TV channels you will pick and pay for. It will be more then just a "per GB" price fight you will only be able see websites you have a subscription Facebooks new internet.org will give you free basic so you can add "subscription"
    Reply
  • Addonic
    What they are doing is turning the internet into a subscription based platform.... like, cable TV channels you will pick and pay for. It will be more then just a "per GB" price fight you will only be able see websites you have a subscription Facebooks new internet.org will give you free basic so you can add "subscription"
    Reply
  • Addonic
    It's pretty amazing how AOL still has any relevance whatsoever in todays age.
    AOL’s media outlets including the Huffington Post, TechCrunch, Engadget, and women-focused video news site MAKERS .

    it will be pay per site like HBO and Showtime and so on you will pay more to see that stuff although some will still be free some will not
    Reply
  • urbanman2004
    Something seems fishy a/b this deal. Seems Verizon's coming up with a diabolical plan to take over the world lol
    Reply