Verizon’s Risky Bet on AOL’s Ad Business

From my story in MIT Technology Review:

In announcing plans to buy AOL for $4.4 billion, Verizon is betting that it can lead the future of television as it explodes from the living room to computers, smartphones, and tablets. But at least in the near term, it faces plenty of headwinds.

The deal, rumored earlier this year, catapults the largest provider of wireless Internet service into the media and advertising technology businesses, in direct competition with companies such as Google and Facebook. Already in the television business with its FIOS cable TV alternative, Verizon now has the potential to help advertisers reach specific audiences viewing online video and TV–still by far the most lucrative ad medium–on any screen. That’s something no other company has yet managed to do.

Although AOL is still known first for its declining but profitable dial-up Internet access business and second for owning prominent sites such as Huffington Post and TechCrunch, its growth is now driven chiefly by enabling the sale of ads–especially video ads–on other sites. The deal, expected to close this summer, would end AOL’s rocky history as an independent company, which began in the 1980s with its pioneering Internet access service and peaked in 2000 when it acquired Time Warner for $164 billion–later seen as one of the most disastrous mergers in corporate history.

Since then, the company has struggled to regain relevance. Under CEO and former Google executive Tim Armstrong for the past six years, it has attempted to build a media business; more recently, via acquisitions such as the 2013 purchase of video ad exchange, it has been cobbling together technologies to automate the sale of video advertising on other sites.

That ad tech business, whose revenues rose 19 percent in the first quarter, is probably what attracted Verizon more than AOL’s media business, which grew only 8 percent. Chairman and CEO Lowell McAdam said his company has been investing in advertising technologies that can reach consumers on any screen, from smartphones to computers to TVs. In fact, it’s expected to launch a service this summer that would bundle TV and video content into a cable TV alternative. …

Read the rest of the story.

13 Questions For 2013 In The World Of Online Advertising

questionsCross-posted at my blog The New Persuaders:

For the past few years, I’ve offered predictions here and on The New Persuaders for what’s likely to come in the next year. This year, I’m going to shake it up and throw out a few questions instead. I think I know the answers to some of them, but if many won’t be answered definitively by year-end, they remain top of mind for me and probably for many others in online media and advertising.

So in this, the first full week of the new year, here are some questions to which I hope to start finding answers:

* Will image advertising finally take off online? I have to believe that as people spend more and more time online instead of reading print publications and watching TV, brand marketers will want and need to reach them there with ads that are aimed at creating consideration for later purchases, not just eliciting an immediate sale like Google’s search ads and too many banner ads. We’re already starting to see signs of such advertising with the early success of Facebook’s Sponsored StoriesTwitter’s Promoted Tweets, and YouTube’s TrueView ads–not to mention the explosion of tablets, which provide a lean-back experience more compatible with image advertising. This won’t be a sudden change, since brand marketers and agencies don’t move quickly, but you can’t tell me there aren’t going to be increasingly compelling ways for brands to influence people online.

* Can advertisers and publishers make ads more personal without scaring people? That’s the $64 billion question, and it likely won’t get answered in full this year. It’s easy for headline-hungry politicians to make a big deal out of Facebook’s latest privacy gaffe or the Wall Street Journal’s or the New York Times’ latest scare story about an ad that followed somebody all over the Web. That’s especially so since Facebook really does push the privacy envelope too far at times, and too many advertisers idiotically chase one more sales conversion at the cost of scaring off hundreds of others or inviting onerous legislation. But making ads more useful to each individual person is not only crucial to online commerce, it’s potentially better for most consumers as well–seriously, I don’t need to see another ad for a fitness center or a new credit card, but that ad for Camper van Beethoven’s new CD had me in a split-second. The answer lies in these two words, everyone: transparency and choice.

* Will mobile advertising work? Well, some of it already does, to hear Google and Facebook tell it. And while those already devalued digital dimes so far turn to pennies when it comes to ads on smartphones and tablets, this still feels more like growing pains than a crisis in online advertising. Sure, the screens are small and people don’t like to be interrupted in their mobile cocoons. So a different kind of advertising is probably needed–clearly, banners don’t cut it on a four-inch screen. But the value to advertisers of knowing your location and maybe the apps you’re using, coupled with knowledge of what your friends like–all with permission, of course–is huge. That permission may be really tough to earn. But if advertisers can offer tangible value, perhaps in the form of useful services related to what you’re doing or looking for or shopping for–and isn’t that the ultimate native ad?–people may loosen their hold on that information.

I have a lot more questions, but I’ve got to stop before too much of 2013 is gone.

Check out more questions at the full post.