Name: Is Verizon smart to buy AOL?
Uploaded: 2015-05-12
Duration: 2 min 41 s
Description: Fortune's Erin Griffith and Robert Hackett break down the deal.

AOL has agreed to sell itself to Verizon Wireless for $ 4. 4 billion. Bob, is this a good deal? I'm not convinced that it is, Erin. Although if you're an AOL shareholder, it is definitely a great moment for you. Okay. So what I'm looking at right now, I'm seeing a trend in the tech space of tech companies who are picking up content companies You're seeing Facebook wanting to host news articles on its own platform. You're seeing talk of Twitter possibly buying PolicyMic. And now you've got Verizon buying AOL. The last time we saw tech companies get into this sort of mindset was back in the dot- com bust. I don't think this reflects something very good on the economy right now. This is true, but things are so much different now. We're not in a tech bubble, I promise. [ LAUGH ] [ LAUGH ] But no there, if you look at what Verizon's actually trying to buy here. It's not Huffington Post TechCrunch, in fact there's been talk already about, you know, them spinning, spinning off the content businesses, and looking instead at AOL's ad tech business. So one of their fastest growing, divisions is this thing where they actually sell ads for other sites, and they have the capabilities of doing that, and that's something that, isn't necessarily valued by Wall Street, but I think that Verizon values it because this means that they can better serve their mobile customers by Selling them ads. I agree, I mean the CEO of AOL, Tim Armstrong has done a phenomenal job, he's done a heroic effort of changing AOL into an ad company rather than really a content company, as it's always been. Although, they make most of their money on dial- up subscribers. This is a true and crazy, crazy fact. An exorbitant sum, yeah. But that said, I don't think that ad tech is necessarily a great business to be in. I mean Wall Street doesn't really value it, if you look at [ UNKNOWN ] ad tech companies like Rocketfuel and Millennial Media, they've been trading at the, in the double digits and it's falling to the single digits. Their pricing has plummeted, recently. Mm- hm. And this is what Verizon wants to pick up from AOL? I don't know. Well, I, I think, I think the difference, though, is that AOL is a really small player in the ad tech [ LAUGH ] world right now. You know, a three, $ 4 billion company when you're competing against Facebook and Google for ad dollars, you, you, you just don't have the scale. But if you apply it to Verizon, which, you know, they're A wireless carrier. They have relationships with hundreds of millions of, you know, phone subscribers. And they, they are, they've got that there. So, I think that mobile advertising is going to be the future. And, if they can put AOL technology into the phones and actually own a piece of that, that could be a really interesting business. The last time Verizon got into advertising, though, they started placing these very persistent cookies on all their users and privacy advocates were in an uproar about it. I don't know if this is gonna reflect so well now that Verizon is going back into the advertise, advertising game. If they do so, they're gonna have to really work out those privacy concerns. Fair point. For one show that always dials it up, go to Fortune. com for more tech debate

Is Verizon smart to buy AOL?

Fortune's Erin Griffith and Robert Hackett break down the deal.