…You’re talking MOBILE, where you need CONTENT, and a fully functioning AD NETWORK.
Which VERIZON didn’t have.
So your loyal MUTATION SEEKER (me) has emerged from the lab after two days of study (he’s read and listened to EVERYTHING pro and con on the SUBJECT), and is here to try and make some sense of why VERIZON paid $4.4 billion for AOL — your grandparents dial-up email service.
I don’t think it’s an accident that the day after the Verizon/AOL merger that a deal announcing AT&T is going to start offering HULU hit…
But I digress and begin with a PARANOID CRAPSHOOT THEORY FOR THE DEAL (always fun before the facts):
Part of me suspects that VERIZON picked up AOL as a sort of petulant broadsword (or the proverbial white-glove-to-the-face) against GOOGLE AND FACEBOOK. Why?
GOOGLE FI could conceivably jam-up the big telecoms (if ANDROID isn’t bitch-slapped by Europe and Canada). And FACEBOOK’S CONNECTIVITY LAB has been launching balloons, drones, and even LASERS to harness the Internet.
As The Wall Street Journal pointed out yesterday: This is a war against all. The providers of SEARCH, CONTENT, and WIRELESS refuse to stay in their individuals box. And a REIGNING TELECOM wanted to strike back against GOOGLE AND FACEBOOK:
So why AOL then? That’s not much of a Maginot line:
Likely because it’s a SMALL ENOUGH DEAL that REGULATORS (FCC, DOJ) won’t get involved.
In the war between CORPORATE COMMUNICATIONS (Time Warner, Verizon, etc…), the OBAMA GOVERNMENT is most decidedly on the side of DIGITAL (and it should be considering how much lobbying dollar TECH drops in their laps), and if VERIZON tried to gobble up something big, they could end up before a COMMITTEE.
So snapping up AOL flew low enough under the Government’s radar, but maybe…maybe…sent a signal to GOOGLE AND FACEBOOK, that VERIZON intends to stay in the game…
But will it really? Was this just a pyrrhic dump of over 4 billion, because in the AD TECH GAME: AOL controls .74% to GOOGLE’S, 31.4%.
So outside of my own decidedly MUTATION-HEAVY SYNTHESIS, why else DID THIS DEAL HAPPEN?
Mobile. Mobile video and how to integrate USER TRACKING and AD SALES.
People now spend over 5 hours a day on MOBILE PHONES. TELEVISION (as a physical object that is BUNDLED) will die, but we will need more and more CONTENT LIKE TELEVISION for people to stream over their phones.
But in the case of AOL/VERIZON it really isn’t ABOUT THE CONTENT:
Does anyone really want to own HUFFINGTON POST at this point (BuzzFeed and Vice have effectively buried it)? And although I love it, does VERIZON really want to own TECH CRUNCH?
And sure: AOL has STUDIO PRODUCTION centers to shoot their own shows (and being in league with VERIZON answers the question of how they’re going to achieve MAXIMUM DISTRIBUTION). Additionally, AOL will deliver 3,600 pieces of ORIGINAL VIDEO CONTENT this year including shows with JAMES FRANCO and JARED LETO.
That’s a lot of VIDEO. And it certainly is getting more important TO OWN AND DISTRIBUTE your own CONTENT in this day and age. But is AOL’S CURRENT CONTENT really WORTH $4.4. billion at this point? Especially since…
Do you really think JAMES FRANCO and JARED LETO can COMPETE WITH NFL and DREAMWORKS?
So let’s be real specific:
VERIZON didn’t buy AOL for it’s CURRENT CONTENT, but it did need a way to CREATE FUTURE IN-HOUSE CONTENT that at some point PEOPLE MIGHT WANT TO WATCH. Because even though VERIZON has deep pockets, BUYING TONS OF CONTENT does get pricey after a while…
Hell, even the VAUNTED NETFLIX and AMAZON models that are going to demolish “linear cable” still cough up over $3 billion annually to license CONTENT, because they don’t have what…
ENOUGH ORIGINAL CONTENT.
So AOL has the burgeoning infrastructure to at some point create IN-HOUSE OWNED, CONTROLLED CONTENT.
BUT THAT’S STILL NOT THE REAL REASON FOR THE DEAL:
When AOL hired TIM ARMSTRONG for CEO, he’d put put in nine years at GOOGLE, so he was basically responsible for helping to construct one of (if not THE MOST) powerful forces in ADVERTISING HISTORY. And when he got to AOL —
He ate up MARKETING FIRMS: PICTELA, CONVERTO, ADAP.TV. As well as VIDEO-FOCUSED SHOPS like: STUDIONOW, GOVIRAL, and VIDIBLE.
SO IN SUMMATION:
VERIZON paid for an ADVERTISING NETWORK to HARNESS their MOUNDS OF CUSTOMER DATA and TRACKING effectively.
Because by eating up AOL, it’s now positioned to pioneer a straight-up ADVERTISING MODEL, that could potentially outflank GOOGLE and FACEBOOK. Because who knows more about you than your PHONE NETWORK PRODIVER. GOOGLE AND APPLE may provide the phones, but VERIZON (which still controls 70% of broadband) knows more about you than ANYONE. It’s why the NSA paid one of it’s first stops there…
P.S.: THAT SHOULD SCARE THE EVER-LIVING SHIT OUT OF YOU. But moving on…
…Because at the end of the day, VERIZON knows it has to go “OTT” (Over the Top) as a VIDEO SERVICE to survive LONG-TERM. And they’ve got the Broadband connection (something NETFLIX lacks and suffers for) to back it up. Verizon is in IN-HOUSE CONTENT, but that’s the secondary tier in the AOL deal.
And if you take nothing else from this article, take this: Here’s why VERIZON COULD DISRUPT:
The fusion of CUSTOMER INFORMATION AND ADVERTISING TECHNOLOGY.
If VERIZON does go “OTT” they can do it without the STANDARD SUBSCRIPTION MODEL (Netflix, Spotify), but literally VIA ADVERTISING and providing the most EXACTING CUSTOMER METRICS because of their NETWORK POSITION.
This one isn’t a game-changer, but it’s worth a deep look.
Hope this helps COLLAPSERS!!!