So what just happened?
Verizon’s (VZ) acquisition of AOL puts an end to a long-speculated rumors of a potential merger with Yahoo or a Verizon exit.
This is a $4.4B cash deal of what used to be the leading portal back in the dot-com era, when it had a $190B market cap (!).
The deal leaves Yahoo (YHOO) and Microsoft (MSFT) as the sole publishers that actually generate their own content, in comparison to Facebook (FB) and Google (GOOG) that rely on user-generated content.
So what were Verizon’s drivers for this deal?
It’s hard to know for certain, but looking at the assets AOL brings to the table, we can think of 3 things: mobile, data and video.
55% of US digital ad spend now goes to Google and Facebook. Over 80% of that spend is happening on mobile. Verizon carries mobile services and wants to be a significant media player and offer more value to its advertisers. As such, AOL and its ONE platform provides a cross-screen advertising platform and reach to leading properties such as TechCrunch, Engadget and The Huffington Post (as well as a network of 3rd party sites).
Marrying the reach with Verizon’s data makes it interesting. As a carrier, Verizon has a lot of information on its users (demographic, location, usage, household income, etc.) and this combination may compete with Google and Facebook’s huge databases, full with our personal data. Advertisers will pay more for this.
The execution here is video. The data-enriched audience is consuming more and more video content on mobile devices and Verizon would like to monetize it via video. Create more video content, distribute it and monetize it. This is exactly where AOL’s latest accessions (5Min and Adap.tv) come in and help.
What will happen next?
Comcast (CMCSA) acquired FreeWheel last year. Now Verizon. Can we assume Viacom (VNV), AT&T (T) and other giants will make a move to follow? Unclear. One thing for sure, they are looking for scale and defensible assets.
