Thursday, July 9, 2015

Verizon-Owned AOL Considering Millennial Media Buy?

AOL, recently acquired by Verizon, is rumored to be acquiring mobile ad network Millennial Media. That might well be considered a digestible purchase, possibly representing a sale price around $300 million. That would not be a big deal for a firm the size of Verizon.

Millennial's share of the $19.15 billion mobile ad market reached 0.4 percent last year, according to eMarketer, down from 0.7 percent in 2013.

The upside would come from better positioning Verizon in the mobile advertising business.

Overall U.S. mobile ad spending grew to $19.1 billion in 2014, up from $10.6 billion in 2013, according to eMarketer.

In 2015, U.S. mobile advertising spending is expected to reach $28.7 billion, according to eMarketer.

It always is a fair observation that tier one telcos and service providers do not necessarily have core competence in many new lines of business outside the core access and transport business.

Nevertheless, smart moves into higher value adjacencies now have become essential, as core revenue sources dwindle and the value of the “access” function declines, relative to applications and services accessed by consumers over the networks.

In other words, telcos have no choice but to transform themselves, as hard as that might be.

Verizon does well to allow AOL management to grow the mobile ad part of Verizon’s business.

In the past, many telco efforts to diversify into computing services, for example, or information technology, have foundered because the new business units arguably were not allowed to run themselves as they thought best, and instead were forced into the morass of “telco” management.

To succeed, telcos will have to learn not to do that. It won’t be easy. But it increasingly is necessary.

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