Report: Verizon, AOL in Mega-Merger Talks to Expand Mobile Video Services

Written by DH Kass 1
January 6, 2015

Verizon reportedly has huddled with AOL about a possible takeover or a collaboration focused on expanding its mobile video advertising.

Telecom carrier Verizon (VZ) reportedly has huddled with AOL (AOL) about a possible takeover or a collaboration focused on expanding its mobile video advertising services, in what could be a mega-merger mirroring last year’s $48.5 billion AT&T (T) and DirecTV (DTV) deal.

At this point, the talks are said to be preliminary with no deal yet on the table, according to a Bloomberg report citing sources.

Verizon is said to be interested in AOL’s advertising technology, specifically for the buying and selling of ads online, which the carrier believes could be fashioned with a mobile video service into a new revenue source. Verizon has tasked three top executives to build a mobile video service, leveraging already acquired technology such as OnCue, formerly Intel’s (INTC) Internet TV platform, the report said, perhaps signaling the potential importance of a deal to the carrier.

Advertising technology is fast becoming AOL’s bread and butter ahead of its premium content, according to an Advertising Age report. In AOL’s Q3, its ad-tech division accounted for $215 million in revenue, a 44 percent jump from the same period last year, while its media properties’ display sales were stagnant. AOL chief executive Tim Armstrong’s strategy to revamp the company has focused on positioning it as an advertising automator for websites and online videos to help businesses target the right audiences with their messaging.

Researcher eMarketer projects AOL’s display ad revenue to grow 13 percent this year to $860 million sparked by its ad-tech unit, the Ad Age report said.

The deal could gain Verizon a coveted place at the table for online advertising revenue and enable it to up its game in online content, mobile video and advertising, the Bloomberg report said. Verizon reportedly already has met with other ad-driven organizations to try to figure out how to up its businesses in those areas.

A buyout also would give Verizon access to AOL’s 2.3 million subscribers along with a number of popular online sites such as Engadget, Huffington Post and TechCrunch. Bloomberg reported that Verizon’s interest in those properties is difficult to gauge at this point, although taken together they attract some 200 million unique visitors a month to rank behind only Google (GOOG), Yahoo (YHOO) and Facebook (FB).