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Verizon Buys AOL In $4.4 Billion Deal

MELISSA BLOCK, HOST:

Verizon said today that it's buying AOL for $4.4 billion. Although AOL isn't the household name it once was, it's still attractive. For one, it's developed software that helps advertisers do a better job of targeting consumers. Verizon also wants a bigger chunk of the fast-growing mobile video market. NPR's Jim Zarroli explains.

JIM ZARROLI, BYLINE: AOL is the company that famously merged with Time Warner in 2001 in a deal worth more than $160 billion. Within a few years, it was widely viewed as one of the most disastrous media mergers of all time. Today, AOL is a smaller company with a much more narrow focus, but the merger announced today suggests it's still a player of sorts. Here was CEO Tim Armstrong on CNBC this morning.

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TIM ARMSTRONG: We turned the company around. And when you look at where we are today and where we're going, you know, we've made AOL as big as it can possibly be in today's landscape.

ZARROLI: With today's merger, AOL will become a division of the communications giant Verizon, which now makes most of its money selling wireless and high-speed Internet services to consumers and businesses. The deal comes at a time when a growing number of people access digital content via cellphones and other mobile devices. Peter Csathy is CEO of Manatt Digital Media.

PETER CSATHY: And that's where the millennials all are. As you look around you, it's all a mobile-driven world now for the eyeballs that the marketers crave.

ZARROLI: Csathy says Verizon is anxious to hold onto these customers as they gravitate toward new devices. And he says there are two reasons AOL can help it do so. First, AOL owns websites such as Huffington Post and TechCrunch, and it also collects and distributes video content.

CSATHY: Over time, kind of quietly, AOL has tried to amass a significant and meaningful video content offering. It just hasn't been able to market it effectively up to this point in time.

ZARROLI: AOL also has a strong ad sales force, and it's developed platforms that help marketers target the consumers they want. Susan Bidel is an analyst at Forrester Research. She says most advertisers don't want to just buy a spot on a certain website. Instead, they want to buy customers.

SUSAN BIDEL: They are buying access to men 18 to 34 within certain geographies who have expressed a purchase intent for autos, for example.

ZARROLI: Today, technology allows advertisers to roam far and wide searching for the kinds of eyeballs they want. AOL has developed what's called an Adtech platform that enables them to do that. It's not the only company that's done so. Facebook and Google have Adtech platforms of their own, for instance. But Bidel says AOL's platform is pretty good, and she says Verizon can make good use of it because it has a lot of Internet customers and it knows a lot about web traffic.

BIDEL: Verizon has a tremendous amount of data. It knows who you are and where you are.

ZARROLI: Bidel says as this technology spreads, there are a lot major privacy concerns that have to be worked out, and the deal has to pass regulatory scrutiny. But if the merger is approved, Verizon is hoping that it will be in a better position to face the Internet's future and that it will have gotten there with a partner from the Internet's past. Jim Zarroli, NPR News, New York. Transcript provided by NPR, Copyright NPR.