AOL comes with strong content such as Huffington Post
Verizons $4.4 billion deal for AOL points to how, as the consumption of digital content grows across screens, there is an opportunity to simplify distribution, build customer profiles and deliver advertising solutions for brands looking to extend their reach beyond television.
Telecommunications providers such as Verizon have been struggling with driving growth as they run out of new people to sell services to, their services become commodities and competition grows from over-the-top players such as WhatsApp. By acquiring AOL, Verizon could position itself for an expanded role in the long term.
As we more and more TV advertising dollars move online - and mobile being the biggest driver of growth for online - this is about putting the piece place not just for the short term, said Mike McGuire, research vice president of Gartner for Marketing Leaders.
What is going to be interesting is the next 3 to 5 years, as we see money refocused from TV to how they can also target them on mobile devices, he said.
How they look to do things like cross device ID starts to look very interesting to advertisers. They are putting some interesting pieces together with this acquisition.
Jockeying for position
Wireless carriers role in the mobile ecosystem including mobile advertising has, so far, not been as significant as once was expected.
While the data that wireless carriers have about their subscribers is considered valuable, none of the big players have figured out how to monetize that data effectively to date.
AOL is an easy way for Verizon to boost its aspirations by leveraging the combination of content and advertising technology that AOL has building up over the past few years.
By combining customer data from Verizon FIOS TV and Internet service, mobile subscribers and AOL, this could enable Verizon to offer advertisers interesting cross-device customer profiles and the ability to track use across devices.
One challenge will be in how Verizon handles the privacy issues, both from a regulatory perspective as well as from a public perception perspective.
Verizon has already begun to experience some successes from its efforts to extend its reach. FIOS, which is relatively new and therefore not a part of the traditional TV system, has been able to sign deals with sports leagues such as the NFL and IndyCar Racing to provide FIOS customers with mobile access to live, streaming games and behind-the-scenes highlights, including some exclusive content.
AOL has been focused on building a platform that attract eyeballs across digital screens, as evidenced by its acquisition of Huffington Post in 2011. While some of AOLs content is popular, monetizing that content has been a challenge.
One area, in particular, where AOL has been focused is on building out programmatic buying offerings, which automates the process of buying and targeting digital ads. The companys ad tech and video platforms have been stronger revenue performers for the company of late.
Mobile is an important driver of the growth in programmatic.
Programmatic advertising in the United States is expected to grow 48.9 percent in 2015 to reach $14.88 billion, representing 55 percent of all digital display advertising, according to eMarketer. Mobile is driving growth in the US programmatic market, and for the first time will account for more than half of all programmatic display dollars in 2015, eMarketer estimates.
Verizon has been building its digital content distribution capabilities for some time. At the end of 2013, Verizon Digital Media Services acquired upLynk, which streamlines the process of uploading and encoding TV Everywhere for live, linear and video on-demand content.
One of the challenges Verizon will face going forward is determining which content to offer exclusively to its customers and which to offer more broadly.
There is certainly the ability and a strong potential that you will see some dabbling in exclusive content windows for OTT or short form video, said Sam Rosen, Scottsdale, AZ-based practice director covering cloud content and OTT video at ABI Research. I think you are going to need to be careful with any exclusivity or lock-in periods that you have.
Fundamentally, you want that content to reach all consumers from an advertising and sharing perspective, he said. There is value in exclusivity.
You will see some experimentation around that. More of the content will be generally available.
Final Take Chantal Tode is senior editor on Mobile Marketer, New York
News Editor Chantal Tode covers advertising, messaging, legal/privacy and database/CRM. Reach her at firstname.lastname@example.org.