The New York Post reported that Verizon Communications Inc. (NYSE: VZ) maybe a bidder for Time Inc. (NYSE: TIME), an arrangement that would seem improbable at first consideration. However, a transaction could add one of America’s largest content companies to Verizon’s two portals. These are AOL, which the telecom already owns, and Yahoo! Inc. (NASDAQ: YHOO), which Verizon will own in June. Verizon needs online audience scale to compete with Facebook and Google, which dominate the online advertising landscape.

Verizon certainly has the money to buy Time, which would sell for $2 billion, plus assumption of its balance sheet, if the rumored $20 price target Time’s board is accurate. Time staff has some overlap with AOL and Yahoo, so savings of $200 million or more are certainly possible. This is the figure outside analysts have used as what Meredith Corp. (NYSE: MDP) could save if it buys Time. AOL and Yahoo have management, editorial staff, administration, video production and ad tech staff overlaps with Time. Verizon paid $4.4 billion for AOL, and it will pay $4.8 billion for Yahoo.

Verizon has at least two critical goals among those it has set as it builds a content empire. The first is advertising technology that lifts the value of the dollars its websites get from marketers. AOL owns some of this technology. So does Time. Time owns programmatic ad-tech company Adelphic, which it bought earlier this year. It also owns Viant, another ad tech company that will control Adelphic activity. Verizon could be on its way to becoming an ad tech powerhouse.

Another reason Verizon wants to own content companies is access to video programming, primarily as a means to bolster its wireless business. Video has become a major source of the use of smartphones. More video would allow Verizon to capture a growing share of the advertising that runs with this video. That would add a line of revenue on top of its wireless subscriber fees. The wireless subscriber market in the United States is saturated. Verizon lost wireless subscribers in the most recently reported quarter. It needs more to enhance its revenue from its wireless business.

How large is Time’s online audience? According to comScore, it ranks 11th among all online properties, with 129 million unique visitors a month. Yahoo ranks third with 207 million. AOL ranks eight with 159 million. Among the three, Verizon could create quite an online content powerhouse.

Get Our Free Investment Newsletter

I have read, and agree to the Terms of Use

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.