Verizon diversifies with a dinosaur

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In the business world enough is truly never enough. Comcast isn’t satisfied being the biggest cable provider in the country, so it acquired NBC and is moving into the broadcasting business. PepsiCo doesn’t just produce soda, it also owns the entire line of Frito Lay potato chips, Quaker Oats, Gaterade, and Tropicana. Clorox, a company whose bleach you might use every weekend, also owns KC Masterpiece barbeque sauce, Hidden Valley salad dressing, and Fresh Scoop kitty litter. What do any of these companies and product lines have in common? Very little beyond these companies strive for diverse revenue streams, and the tech world is no different. This week’s example: Verizon purchasing AOL Inc for $4.4 billion.

I know what you’re thinking, “America Online? Didn’t that company die with the dial-up modem?” Well first off, the dial-up modem is still used by 3% of US internet users so back off. Second, AOL may no longer be the juggernaut internet provider they were in the nineties, but they still generate a great deal of internet traffic with their online video offerings and 2011 acquisition of Huffington Post. Finally, while Verizon is hands-down the number one cellular provider in the United States its media offerings are close to non-existent. Acquiring AOL may not be as flashy as Facebook buying Instagram in 2012 or Google acquired YouTube in 2006, but it certainly gets them in the content producing world.

Truth be told it doesn’t matter if Verizon dug up the rotting carcass of 1990s dial-up internet provider Prodigy and trotted it out as its big media buy, Verizon is almost immediately one of the big players in online content. With its fingers in cellular service, cable delivery, and now online content delivery and generation Verizon is instantaneously a media magnate. Acquisitions like these are huge for diversification and attracting the public persona of creative and risk-taking.

In 2010, Amazon made a similar splash by unveiling its plans to build an original content department with Amazon Studios. It’s taken five years for Amazon Studios to become a legitimate content provider, but this year it won its first Emmy for its online series “Transparent,” and its given the company the look of validity and credibility. What is the world’s largest online retailer doing in the television and movie game? Simple, trying to making a buck. Awards and recognition are nice, but ultimately having exclusive content brings in eye-balls and shoppers to the Amazon brand. Verizon hoping the same story will unfold with its pick up of AOL.

Oddly enough, this same move was made 15 years ago only then it was AOL acquiring Time Warner to bring exclusive media dollars into its world. The difference is the AOL Time Warner Inc. merger is considered the worst business move of all time. Due to horrible management and poor integration AOL was never able to leverage Time Warner’s properties into online and media domination. A puzzling failure when you consider at the time AOL was the biggest internet provider in the country and Time Warner’s subsidiaries included HBO, Warner Brothers, CNN, DC Comics, TBS, and many more.

Ultimately what does this mean for Verizon customers? Potentially exclusive content that will make being a Verizon subscriber desirable. However more likely is Verizon increasing its costs and overhead in maintaining the struggling online service eventually leading to customers paying more. Does it have to go that route? No, but if in 10 years AOL tanked its massive fortunes from king of the web to internet laughing stock, what are the chances this ends up being a good move for Verizon users?

Patrick Boberg is a central Iowa creative media specialist. For more tech insights, follow him on Twitter @PatBoBomb


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