Verizon-AOL Deal Can Boost Mobile Video Ads

by CXOtoday News Desk    Jan 07, 2015

digital

Online content and mobile video advertising are areas that are likely to see tremendous growth in the coming years and a step in this direction is a potential deal between two of industry’s biggest tech giants - Verizon Communications and AOL as Bloomberg reported on earlier this week.

Whether the companies will opt for a joint venture or acquisition is yet to be reported, but such deals would expand Verizon’s mobile-video offerings by focusing on AOL’s programmatic advertising technology, leveraging the power of the web. Moreover, the deal (if it takes place) can have a big impact on the online content, video and advertising segment.

A report by eMarketer last year states that mobile advertising would lead 2014’s rise in total media ad spending in the U.S., with advertisers spending 83 percent more on tablets and smartphones than they did in 2013 — an increase of $8.04 billion.  BI Intelligence also reports that online video is growing faster than most other advertising mediums. Globally, video ad revenues will reach nearly $5 billion in 2016, up from $2.8 billion in 2013, while TV ad revenue will decline by nearly 3 percent per year during the same time period.

The report also estimates that Video ad revenue will increase at a three-year CAGR of 19.5% through 2016, which is much faster than any other medium other than mobile. Even though online video ads were significantly more expensive than other formats, it will see a huge drop in price in the coming months as more publishers are rushing into this format.

Experts believe that in such a scenario, a deal with AOL could help Verizon in mobile video but also with its mobile advertising effort. AOL is a media company and media companies receive the bulk of their revenue from advertising. AOL has a number of Web sites ranging from Huffington Post to DailyFinance to Engadget, which all include some form of video advertising. Verizon, according to the Bloomberg report, would be interested in a joint-venture with AOL for its advertising technology.

Last year, Verizon acquired Intel Media and its set-top box and services OnCue, strengthening its presence in the Internet TV business. In the previous year, Verizon bought EdgeCast Networks, a content delivery network company. Both these acquisitions push Verizon deeper into the online content delivery business.

According to a comScore data, the American online video audience has swelled to 56 percent of the population, meaning that about 189 million Americans watch video online each month. That is almost 50 percent more than the percentage that turned out for the 2012 presidential election.     

Tech analyst and author Christophor Rick believes performance-based pricing is the vital driving force right now as it accounts for 65 percent of revenue for the whole digital advertising industry, of which digital video advertising is the key.

 “Several other factors pushing online video advertising forward are more expansive TV Everywhere choices, packaging of traditional TV ads with video on demand (VOD) and DVR ads, expanded use of gross rating point (GRP)-like metrics online, more innovative and interesting ad formats, and video advertising against mobile apps and games,” he writes in his blog.

With greater maturity, there will be more powerful video advertising tools and a more cohesive overall picture, he says, as newly launched video ad platforms have been among the companies to adopt programmatic tools, including real-time bidding, ad exchanges, and advanced analytics.

AOL’s advertising technology basically automates the purchasing and selling of online advertisements offering several such advanced capabilities. Therefore, experts believe any possible deal between the two companies could help Verizon catch up with rival AT&T as the market is ripe and wireless providers are all racing to enhance their consumer offerings.