Verizon surprised the ad tech community earlier this week announcing its $4.2 billion acquisition of AOL. The early Internet pioneer has moved aggressively into mobile and video advertising under the helm of CEO Tim Armstrong, amassing an impressive technology portfolio in addition to large media assets that include TechCrunch and the The Huffington Post.
The future of the media assets remain unclear, but AOL’s ad tech assets position Verizon to make an aggressive push into mobile and video advertising. The carrier has experimented with advertising products before through its Precision Market Insights division, but the efforts have remained mostly under-the-radar.
Carriers have struggled to find ways to monetize the massive amount of data, which flows through their networks for years, but advertising may prove their best bet. In addition to other data points, Verizon and others have access to one of the largest sets of location data outside of possibly Google.
These data are the byproduct of the switching algorithms that helps devices locate the nearest cell tower. Every time a user needs to make a call or connect to the internet, their device sends “switching data” to the network that helps the device determine the most effective combinations of towers to use. Carriers can use this information — essentially, the distance from various towers — to triangulate the location of the millions of devices on their networks.
We caught up with a handful of ad tech executives to breakdown the news and evaluate the potential impact of the a Verizon-AOL tie-up on the mobile, and particularly, local ad tech sector.
Duncan McCall, CEO at PlaceIQ
I could certainly remark with regards to the usual clichés about how this deal is all about mobile and data. But in truth this is the deal I’ve been waiting for two years to happen. Ever since AT&T shut down most of its failed “AdWorks” digital/mobile unit, it became clear that there were a number of suboptimal strategies for a mobile and data behemoth such as a telecom, to actually leverage its huge assets in a digital sense. Therefore, the only viable conclusion from an organizational, technical and cultural standpoint to successfully deploy these data assets at scale would be to own a data and ad technology company with strong technology, leadership and talent–and run it separately from the mother ship.
While it has been rumored before that AOL was going to be the solution to this quandary for Verizon in particular, to me it is immaterial who it is, because it could have been one of many competent vendors out there. What’s more important is that I believe this signifies an evolution in the industry whereby data and to some degree mobile become so interwoven into this new world of consumer understanding, that we will see some of the biggest brands, agencies, and software companies striving to own and bring in house this core competency.”
Frost Prioleau, CEO at Simplifi:
Teaming up with Verizon should provide AOL access to significant amounts of incremental data, and potentially with some incremental inventory as well. This could help AOL with cross device matching and geo-targeting, both of which are important in mobile advertising and attribution. Historically we have seen AOL more focused on larger, national campaigns instead of localized campaigns, so it is hard to say whether this acquisition will prompt a new foray into local.
For Verizon, this acquisition seems to be all about building over-the-top capabilities to deliver video to mobile devices, and to provide an associated revenue stream with mobile video advertising. This is attractive to Verizon both because video and mobile advertising are growing very quickly, and also because it they are interested in being more than the proverbial “dumb pipe”. By getting into video advertising, Verizon is setting themselves up to compete for TV/Video advertising dollars currently flowing to cable companies, networks, and TV stations.
Vikas Gupta, director of marketing and operations at Factual:
Verizon’s acquisition of AOL brings together a set of assets that together could prove to be an interesting player in mobile-location. Verizon, as a carrier, has a tremendous amount of location data on its subscribers generated by its regular network operations, and AOL has experience in working with location data via MapQuest. This isn’t quite plug-and-play, but if they figure out how to use Verizon’s location data asset they can build a fairly comprehensive understanding of mobile users.
The location ingredient can provide a dimension of real-world understanding of user behavior at pretty significant scale (over one-third of the US population). This, when combined with the cross-device capabilities, can give them powerful marketing data to push through the entirety of AOL’s adtech platform. Additionally, there may be an intriguing opportunity here for Verizon to become a player in local search by giving MapQuest preferential distribution. A mobile mapping app with over 100mm users can be a tremendously valuable asset, although it will be a tough battle against Google and Apple’s mapping apps.
Luke Edson, SVP national markets group at YP:
It is clear that three things create value and synergy in this deal — brands, content and ad technology. Both Verizon and AOL through its portfolio of B2C brands provide utility to consumers. In order to ensure that utility does not become commoditized, it is necessary to have differentiated content. In this case, that’s mobile video.
Another important part of the deal is ad technology, which is required to make efficient and effective connections that move the marketing needle for advertisers. At the end of the day, this move solidifies to me that if you have strong consumer brands and a leading advertising platform to connect those consumers to advertisers, it creates a lot of value in the market.
David Shim, CEO at Placed
Upon completion of the acquisition, Verizon will be a Content-to-Consumer company, generating the content (ex. Huffington Post, TechCrunch), delivering it through its own infrastructure (ex. FiOS, Wireless), all while owning the ad delivery process (ex. ONE by AOL). Integrated correctly, ONE will play a significant role in how ads are delivered across the Verizon ecosystem.
This approach of owning the entire Content-to-Consumer experience isn’t limited to Verizon and AOL, rather we’ve seen other players in the market (most notably Comcast) take a very similar approach (ex. NBCU, Freewheel). In the next few quarters it will be interesting to see how the other infrastructure companies respond.
Steven Jacobs is Street Fight’s deputy editor.