As I wrote yesterday, “on paper” the Verizon-AOL deal makes lots of sense. It fills in gaps and blanks in Verizon’s portfolio.
Media consumption is moving to OTT services and mobile devices. AOL’s got content, ad-tech (esp. programmatic video) and ISP subscribers. All of these things can potentially be “leveraged” by Verizon to compete and grow revenues. Longer term Verizon is facing the near disappearance of its wireline business, flattening of mobile subscriber and data revenues and erosion of its FIOS cable TV business.
AOL helps the company across the board — potentially. Many ad execs and ad-tech gurus agree this is an intriguing deal with a good deal of opportunity for the telecom company.
Verizon also is now in the (mobile) advertising business, which it has not be able successfully enter to date on its own. There are questions about whether Verizon will spin off the content assets (e.g., HuffPo or TechCrunch). AOL is denying that’s going to happen.
The big X variable in my mind is culture. Will Verizon be able to manage and integrate AOL without screwing it up?
Verizon will say it’s a technology company. But it’s really a phone company with all that implies about its culture. Say what you want about AOL but it’s a digital advertising company. As long as AOL has been around it’s still and internet company and doesn’t have a culture anything like a phone company.
Disney has successfully acquired Lucasfilm, Pixar and Marvel and so far has allowed those entities sufficient creative independence to flourish (whatever you think about superhero movies and whether they’re ruining the industry).
Verizon will need to do something quite similar, while integrating AOL enough to realize the benefits of the acquisition. However if Verizon tries to impose or insert its culture at AOL most of the key people will quickly go out the door.
There are numerous examples of companies not being able to effectively ingest acquisitions, which means wasted time and money. Most of the time this has to do with a clash of cultures. The all-time biggest failure is arguably AOL-TimeWarners. Two other immediate examples that come to mind are: RHD-Business.com and Intuit-StepUp Commerce (and now Demandforce).
Do you agree with this? Can can you think of other examples of culture-based acquisition failures? What’s your outlook for Verizon-AOL in particular?