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AOL’s Acquisition of Millennial Media Will Strengthen the Reach and Depth of Verizon’s Mobile Advertising Capabilities

by Nitesh Patel | Sep 07, 2015

Following months of rumors on 3rd September 2015 Verizon/ AOL finally acquired independent mobile advertising network, Millennial Media, for $250 million, or a 30% premium over the previous day’s closing price. As highlighted in Strategy Analytics’ report Verizon Buys AOL: Implications for Verizon’s Media Strategy, Verizon is targeting growth in digital advertising, and in particular mobile advertising. We forecast mobile advertising (including mobile search) will surpass $84 Billion globally by 2021, with North America accounting for 35%. Despite AOL’s strength in display advertising and its acquisition of mobile ad network, ThirdScreenMedia, back in 2007, AOL lacks a significant presence in mobile advertising (e.g. phones, tablets and wearables). Therefore, I am not surprised that AOL has acquired Millennial Media to plug the mobile advertising gap in its overall digital strategy.

Millennial Media initially began life as a premium mobile ad-network, selling mobile publisher app and mobile web inventory to advertisers directly. Since then, Millennial Media’s acquisition of JumpTap in August 2013, its partnership with Ad-Tech firm, AppNexus, in September 2013, and then the acquisition of mobile supply-side platform (SSP), Nexage, in September 2014, has broadened Millennial Media’s capabilities to cover a greater portion of the mobile advertising value-chain. Therefore, by acquiring Millennial Media, AOL is buying mobile advertising capabilities, including:

  • relationships with premium publishers - to add to AOL’s existing publisher relationships
  • programmatic/ Real Time Bidding (RTB) ad buying capabilities – which is driving a growing share of mobile advertising
  • supply-side tools for advertisers and agency trading desks to manage mobile ad buys

Put simply, the purchase of Millennial Media gives AOL both scale and reach across the mobile advertising value-chain. Furthermore, the acquisition of Millennial Media fits with Verizon/ AOL’s aims to target further growth opportunities in mobile advertising, and over-the-top services.

Beyond scale, I expect the combination of Verizon’s customer data, which Verizon is harvesting via its Precision Market Insights division, combined with third-party data sources already used by Millennial Media, to add value to publisher impressions. As I highlighted in my report on opportunities in the location-based advertising market, the lack in availability of verifiable real-time location information about users is hampering the growth of location-based services, and could provide a role for carriers to supply reliable location information.

So, what will be the impact of this acquisition on the digital advertising marketplace? Advertising expenditure on mobile, even excluding mobile search which is dominated by Google, will be the fastest growing mobile media segment globally, outpacing the growth in consumer spend on premium content, and on data access. Therefore, rather than negatively impact mobile advertising market leaders, Google, Facebook, Apple (iADs) and Twitter, AOL is positioning for overall growth in the rising over-the-top (OTT) revenue opportunity. As we continue to look at the mobile advertising opportunity more closely in our research, one of the key questions we will address is whether other operators should follow Verizon/ AOL (Millennial Media), Telefonica (Axonix), Orange (Unanmis) and SingTel (Amobee) by jumping into the mobile advertising value-chain.

 

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