What do you get when you combine the one-time champion of dial-up and the current wireless subscription leader? You get an advertising technology player that could compete more closely with Facebook and Google, according to top industry leaders.
On its surface, today's Verizon offer—$4.4 billion—for AOL looks like a bid to own a lineup of compelling digital properties—Huffington Post, TechCrunch, Web video productions and other content offerings. Underneath it all, of course, is advertising technology that AOL's Tim Armstrong has invested in for years, allowing the company to deliver ads for desktop, mobile and TV.
Now, AOL will have another potential advantage if it can incorporate consumer information that only Verizon Wireless owns, namely billing and household data that is ripe for targeted advertising.
"Verizon has information that no one else has on all these devices—what people are downloading and how they're behaving—they have this large, captive audience" said Sivan Metzger, svp of business development at Kenshoo. "And AOL has been building the technology to leverage third-party data, so connecting to a giant player like Verizon, with great reach and accurate data, is unprecedented."
Verizon Wireless counts 109 million subscribers. It also has FIOS television and Internet, and now it can distribute AOL's digital content to all these screens. Ad tech experts said Verizon could act as a data pipeline for AOL's adverting business, which could now access consumer profiles and device IDs to deliver more effective marketing.
A Verizon-AOL union opens opportunities to advertise on smartphones, on desktops and through its television boxes.
"This is a mobile deal front and center, but there are some interesting applications," said Gian LaVecchia, MEC managing partner and head of digital content marketing in North America. "We'll start seeing [television] ad delivery. In this new world you want to deliver messages that are connected and sequenced across screens, and companies like Verizon and AOL are now uniquely positioned to fulfill on that goal."
In the past year, AOL built its One platform, billed as its answer to Facebook's people-based marketing machine. That was the social network's big advertising advancement, taking all it knows about people using their true identities and allowing brands to target them on laptops and mobile devices. And the move plugged Facebook's ad network into outside digital properties, as well.
Facebook became the fastest-growing force in mobile advertising, and Google is still the largest. Now, a Verizon-AOL tie-up, pending regulatory approval, would create a formidable third option.
"This is an opportunity to have another major player at the table," said Scott Ferber, CEO of Videology. "Facebook and Google are so dominant. It's really important to develop and have alternatives for brands and agencies."
Industry observers expect to see a lot more deals like this one, with telecom rivals AT&T, Sprint and T-Mobile also needing an entry into mobile advertising technology. The wireless providers are all plugged into big subscriber bases with potentially powerful insights about their consumers.
Of course, the Verizon deal depends on regulatory approval, which will likely come with some scrutiny into how it plans to use consumer data, according to sources. It's important to remember that Verizon has faced criticism for data practices in the past. Earlier this year, it was called out for placing "super cookies" that persisted on users' devices, even after a person tried to delete them, and they kept track of Web browsing habits. Verizon has since altered its policies on how it deploys these tracking codes.
Also, the ultimate success of Verizon's AOL pickup depends on how well these two companies can mesh technologically and culturally. No one predicts an overnight ability to match the kind of innovation Facebook and Google have brought to data-driven mobile advertising.
"Facebook and Google's ambition is unprecedented with ridiculous new product innovations every day," LaVecchia said. "Verizon and AOL are not in a position to do that yet."