Does Verizon Have its Eyes on AOL?

January 06, 2015
By: Steve Anderson

2015 is getting off to a flying start, as new reports suggest that Verizon Communications may be setting up talks with AOL (News - Alert) about a few important topics, one of which may be a joint venture of some type, and another may be a full-on acquisition, geared toward expanding offerings in the popular mobile video segment. Though much of this is still in the early stages of talks, it's still sufficiently large to get many in the field wondering just what's up Verizon (News - Alert)'s collective sleeve.

The reports come from sources who requested not to be named as the “discussions are private,” but the word is that Verizon has a particular interest in what's known as programmatic advertising technology developed by AOL. The technology in question more specifically relates to selling advertising online, and reports suggest that it could be used with mobile video to create a kind of monetization process to make online video more profitable a venture. But should it go sufficiently far to mean a complete takeover of AOL, there would be further benefit to Verizon as it would gain not only new paying subscribers, but also a slate of Internet properties, including the Huffington Post (News - Alert).

While it does seem possible that Verizon could outright take over AOL, perhaps the more likely possibility is the more limited joint venture, which would keep the process focused on the digital advertising portion of things. Indeed, as Needham & Co. senior analyst Laura Martin points out, Verizon could build or buy its own digital video-based response, but it would not be likely to build it with sufficient rapidity to make it a force in the market.

But some have also noted here that Verizon is still paying off the debt it incurred to land Vodafone (News - Alert)'s 45 percent of Verizon Wireless, and is also working to save up for a wireless spectrum auction that got started back in November, a point in which it will need to engage lest its competitors get more spectrum and start offering more and better connectivity. So while a complete acquisition is possible, it's somewhat less likely than a simpler joint venture.

It's certainly not out of line to see Verizon interested in a way to better monetize online video. It's getting to be an extremely popular medium in which to work, and more and more of television in general is going online. That people would want access to that content on a mobile device makes total sense, and that Verizon accordingly would want to both offer a service its customers were interested in as well as make money in the process of offering said service really only, again, makes sense. While it may be a bit much to suggest that Verizon wants a full acquisition, even this wouldn't be out of line; AOL has several major Web properties to its credit, and for Verizon to end up with control of same would simply help augment Verizon's online presence. But it wouldn't be necessary, and given that Verizon's somewhat strapped for cash after previous acquisitions, it makes the joint venture angle much more likely to come off in the end.

Still, the key point remains. Verizon is likely to be working with AOL to an as yet undetermined degree in a bid to produce a solution that will make mobile video much more valuable to Verizon. That's a rational move, and one that will likely ultimately produce a major payoff for Verizon.

Edited by Maurice Nagle