Verizon CFO Fran Shammo recently clarified that the telecom major is not looking to sell AOL's video and media brands such as The Huffington Post, TechCrunch and Engadget. It was earlier speculated that the company could spin off The Huffington Post after closing the transaction, expected by the end of this summer. Verizon stated following the deal announcement last month that its primary focus was on AOL ’s rapidly expanding programmatic ad offerings, which are likely to open new avenues of revenue generation, going forward. It plans to incorporate this digital advertising technology into its mobile-first video service launching later this year. In a separate announcement, Fran Shammo also stated that Verizon was not interested in buying Dish Network. It was speculated that the carrier could buy the pay-TV provider for its amassed spectrum wealth, but the Verizon CFO clarified that they did not require additional spectrum at this point. We have a price estimate of $56 for Verizon’s stock, which is over 15% ahead of the current market price. See our complete analysis for Verizon Verizon’s Focus On AOL’s Ad Business Notwithstanding Verizon’s decision to keep AOL’s content business, its main focus is on monetizing the latter’s algorithm-based intelligent online advertising solutions business. AOL generated $625 million in revenue in the first quarter this year, registering growth of over 7% over the prior year quarter. Sales in its advertising business, reported as AOL Platforms, registered growth of 21% year over year to about $280 million, driven by growth of 80% in programmatic ad sales. AOL Platforms now contributes almost 45% of the company’s total revenue compared to about 40% a year ago. AOL’s other businesses - the Brand Group (which includes The Huffington Post, TechCrunch and Endgadget) and the Membership Group - reported sales growth of 10% and negative 7%, respectively, in the same period. Monetizing the rapidly growing consumption of online content on mobile devices is both an opportunity and a challenge and AOL’s focus on this is likely to have been an important factor, if not most important, for Verizon’s interest in the company. AOL’s mobile revenues grew over 100% in the first quarter and there is still significant upside to this considering that a large proportion of the company’s mobile inventory currently does not show ads. Another positive in AOL’s recent performance is that it has been successful in developing cross-screen and multi-screen targeting capabilities for ad campaigns. The effectiveness and adoption of such campaigns is likely to expand further (from current 56%) with the company’s latest offering - ONE by AOL. The company claims that ONE will help companies understand how consumers react to their ads and how much of their advertising expenditure actually converts into revenues. Such an advanced algorithm is likely to help AOL better compete with behemoths Facebook and Google in the digital advertising space. According to research agency eMarketer, AOL had a share of about 0.75% in the $145 billion global online ad business last year, compared to Google’s 31.4% and Facebook’s 7.9%. The agency predicts that AOL’s digital display ad revenue in the U.S. is likely to rise by around 14% in 2015, behind the industry’s average increase of 20%. It also estimates that AOL’s share in the $27.05 billion U.S. online ad business is expected to be 3.5% this year. View Interactive Institutional Research (Powered by Trefis): Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap More Trefis Research Like our charts? Embed them in your own posts using the Trefis WordPress Plugin.
Verizon has confirmed it is not planning to sell AOL‘s video and media brands such as The Huffington Post, TechCrunch and Verizon. Following the deal, Verizon stated its primary focus was on AOL’s rapidly expanding programmatic ad offerings, which are likely to open new avenues of revenue generation, and which it plans to incorporate into its mobile-first video service launching later this year. AOL has also been successful in developing cross-screen and multi-screen targeting capabilities for ad campaigns, which is expected to see an improvement in effectiveness and adoption with AOL's ONE.