Verizon/AOL

The song remains the same. Clueless old farts make deals for legacy companies that are vastly overpriced, believing brands have meaning in the fast-moving internet world.

That’s right, while Microsoft buys Nokia, Facebook purchases Instagram and WhatsApp. Because Mark Zuckerberg actually uses the internet and whoever really made the decision at Microsoft does not. And how come we never hear about Redmond’s purchase of Skype? It’s kind of like Garth Brooks’s download site and album sales, if anything good happened he would have told us, but he didn’t.

The old CEO of Verizon knew what he was doing. That it was all about NETWORK! That’s why I overpay for the red company, because not only did I used to want to know that they heard me now, today I want LTE coverage in the hinterlands, which I get. But while this new bozo was shifting towards content he let speeds decline, AT&T is actually faster in some areas (don’t switch, you still can’t get a connection, LTE is nonexistent in too many places and you can get text messages days late) and T-Mobile is eating his lunch by providing power-users data access overseas. Want to increase your market share? Start with the influencers, those who get others to follow. Once they go somewhere else, you’re toast.

So what Verizon is buying here is an ad network.

But it could have bought the same service from a third party for much less. To overpay for AOL and its content is nuts.

As for entering a new sphere, I’m reminded of HP and Palm.

Palm is an also-ran with new technology that fails in the marketplace and is then laid off on HP which buries it. AOL is an also-ran whose prominence is in the distant past, like Palm’s was, and it cannot be resuscitated. As for Tim Armstrong, he’s a SALESMAN! Better to invest in a techie who can actually build something worthwhile than a guy who specializes in smoke and mirrors. Buying AOL is like buying BlackBerry. Something that once was that is dying a slow death, something with legacy adherents who are nearly meaningless. Acquiring dialup customers is like rolling up stick shift users, and even FERRARI has gone automatic!

As for the content play…

Speculators say that the Huffington Post may be spun off. As for TechCrunch, it was decimated when its star employees left eons ago. Because they couldn’t work for Mr. Armstrong. Who strong-armed them. As for Ms. Huffington, she’s got a nearly worthless site that has been trumped by BuzzFeed. That’s right, the HuffPo is all about link-bait, the lefties who supported Arianna left the building long ago. Once again, you’ve got an oldster who doesn’t understand the landscape who keeps saying she’s wining when she isn’t. Furthermore, BuzzFeed proves it’s all about original content, and Vice knows that he who has boots on the ground wins in the coming news wars. The HuffPo has nearly neither.

But the truth is Verizon’s Lowell McAdam and Tim Armstrong bonded in Sun Valley, that’s where it happened, at the Allen & Company confab. Proving once again it’s who you hang out with, who you know, that access trumps content.

So the game is over. AOL is finally dead. Subsumed into a larger company such that we can not assess its decline.

As for Verizon, which famously rebuffed Steve Jobs and the iPhone just like XM rebuffed Howard Stern, forays into content are a huge, money-wasting effort. Did you know that Verizon had a deal with the NFL? Nobody does. Verizon could have put a stake in the heart of AT&T the same way XM could have put a stake in the heart of Sirius, but instead, while it’s trying to figure out the future T-Mobile is putting a stake in its heart, because Americans are cheap and Verizon has got no cheap offering. T-Mobile is killing Sprint and Verizon is leaking too. But McAdam spends money on AOL? Isn’t it about the NETWORK?

Furthermore, the television/movie wars tell us if you want to expand into new territories it’s all about the content. That’s what Netflix, Hulu and Amazon are in a war over. Want to go into the content business Verizon, then feature exclusive content we want to watch!

What if you bought an ad platform and you had nothing anybody wanted to see.

Then you’d be Verizon.

Ass-backwards, if the strategy has any merit at all.

Call a spade a spade, this deal is nearly ridiculous.

But you don’t have to hear it from me, just read Twitter:

You’ve got jokes: Twitter reacts to Verizon’s AOL acquisition

These are the people you have to convince before the Street.

But Lowell McAdam doesn’t know that…

 

See also:

The Great Unbundling

Internet Rules

 

~~~


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What's been said:

Discussions found on the web:
  1. rd commented on May 12

    We get our internet and landline phone on Verizon Fios. We had gone a long time without cable, but decided we wanted it for various reasons, so we called up Verizon to add it to our bundle – but lo and behold, they didn’t offer TV service on their Fios line in our area. So we got DirectTV instead.

    BTW – I didn’t know that AOL was still in business, never mind that it was worth $4B. So the news articles were worth reading just to learn that it wasn’t dead yet.

  2. milbank commented on May 12

    AOL is the Afghanistan of “dot com” acquisitions.

  3. BennyProfane commented on May 12

    You gotta hand it to Armstrong. I thought he would just suck another four or five years of ridiculous pay for himself and a few others out of the shell of a company long gone, but, he actually made it valuable enough for another CEO to spend 4 billion for that shell, and I guess his grandchildren are set for life after he signs on the dotted line. Speaking as someone who’s retirement savings were reduced by two thirds after the AOL/TW fiasco, I just have to laugh at this BS. What do these people do for all the money they make?

  4. RC commented on May 13

    Ofcourse this is a ridiculous deal. Generally it is towards the fag end of a bull market absolute ridiculous deals and mergers are made. This story along with Barry’s other post about the crazy art auctions are becoming the increasing number of data points that suggest that the party might be coming to an end.

    Verizon and other carriers desperately not want to become “dumb pipes” that ferry internet traffic on which others make their billions while they get nothing. Verizon CEO thinks that by buying this ridiculous POS his company is no longer a dump pipe. Well. This is being delusional, but he can do it, it aint his money!!!

  5. Low Budget Dave commented on May 13

    So Verizon is going to own HuffPo? I predict tomorrow’s headline will be: “Why we just now decided that net neutrality is a bad thing.”

  6. Manofsteel11 commented on May 13

    1. AOL has a cutting-edge digital ad platform, that is as good as any, but under monetized.
    This cross-channel platform has delivered consistent top and bottom line growth.
    It is backed by a very talented team that is the result of multiple acquisitions in this space.
    2. AOL has a nice share in the online video arena, in terms of eyeballs watching the videos and the related ads. Furthermore, this video division has experienced growth that is considerably higher than that of Google’s or Facebook’s (Over 40% for the former as compared to single digit growth for the latter). Managed in the right way, this presence could be leveraged in a very substantial way.
    3. The content parts of AOL are strong, and may create additional value in the age of smart TVs and mobile TV.
    – Arguing that AOL is like Palm is an analogy that relates to an old AOL, during the early days of the internet. Today’s AOL is more like today’s IBM – it has very little to do with the original business, except the name…

  7. BoKolis commented on May 13

    So, I’m not crazy for feeling that Verizon’s network is now almost as crap as AT&T’s. I can’t wait for this bullfrog to choke on its own face. That stick shift comment made me bristle.

  8. Moopheus commented on May 13

    “That’s right, while Microsoft buys Nokia, Facebook purchases Instagram and WhatsApp. Because Mark Zuckerberg actually uses the internet and whoever really made the decision at Microsoft does not.”

    Not really sure what one thing has to with the other. MS wants to play in the phone market, which means they have to produce, you know, actual phones. Sure, content is great but does your whatsapp message appear magically in the palm of your hand? You know what AOL has that Instagram doesn’t? Actual revenue. A lot of it from people paying for dial-up lines, because they live in places where broadband is still hard to get, or just pain costs to much. Maybe you are glad to overpay for Verizon but not everyone can. Sure, maybe they’re just buying an ad platform, but so what? How does Facebook make money? Ads. Google? Ads.

  9. Rich in NJ commented on May 13

    Manofsteel11 makes the counterargument very well.

    Speaking of original content:

    http://www.buzzfeed.com/josephbernstein/verizon-security-flaw-left-millions-of-home-internet-users-v#.ocAvm7O4qd

    BuzzFeed News has learned of a vulnerability in Verizon’s service that could have allowed anyone to view the personal information of any of its 9 million home internet customers simply by visiting its website with a spoofed IP address — the very same personal information that can be used to obtain password resets and gain full control over those home accounts.

    Verizon fixed the security loophole after being notified of it by BuzzFeed News.

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