AOL / Verizon: prophets without profits

maggio 15, 2015

Pubblicato In: Articoli Correlati

AOL has 4,000 employees but only one Digital Prophet. That would be David Shing, or rather Shingy . He earns his six-figure salary by telling companies about branding and the internet, and has an elaborate mullet.

One of Shingy’s go-to platitudes is that mindshare (whatever that means) equals market share. In AOL ‘s case the two seem to diverge. The public perception of the company – among those who realise that it still exists – is associated with the dial-up modems of the 1990s. In terms of market share, AOL has carved out a niche in the advertising business. In online video advertising, it has the fourth-largest reach in the US, MoffettNathanson reckons. Its programmatic advertising sales – using automation to distribute ads across AOL-owned content and sites such as Facebook and Twitter – grew 80 per cent from a year ago in the most recent quarter.

Verizon ‘s $4.4bn acquisition of AOL is the latest in a string of ad-tech deals, which include Yahoo ‘s purchase of BrightRoll and Comcast ‘s of Freewheel. Set aside AOL’s content and dial-up businesses, and the price tag is slightly more than two times its trailing annual ad sales. That looks cheap next to the Freewheel deal, at 10 times, or the BrightRoll deal, at six. Verizon plans to integrate some of AOL’s video advertising technology into an à la carte mobile video offering to be launched this summer.

The big question is how much more Verizon will have to do to make its new ad business profitable; it makes no money at present. Few details have been disclosed. But licensing or creating content is costly (just ask Netflix ). Shingy approves of the deal, of course, saying that the world of context and content is replacing the age of social media.

For Verizon, buying an ad tech company is the first and easiest step towards creating a video business. Will the next steps will go as smoothly? Shingy’s confidence is not infectious.

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