What The Verizon-AOL Deal Is Really About

A key reason for the deal between Verizon Communications Inc. VZ and AOL, Inc. AOL is related to AOL’s ad tech, according to Alex Kantrowitz at Advertising Age.

With the move to mobile devices, the traditional method of using browser cookies for targeting advertising broke down. AOL, however, “owns the key to fixing this problem: concrete mobile data which can be used to tie user identity across devices,” Kantrowitz wrote.

In a memo to employees, AOL CEO Tim Armstrong said, "The deal means we will be a division of Verizon and we will oversee AOL's current assets plus additional assets from Verizon that are targeted at the mobile and video media space. The deal will add scale and it will add a mobile lens to everything we do inside of our content, video and ads strategy."

Integrating Verizon’s data and AOL’s ad-tech would enhance location-based advertising and possibly provide new insights for advertisers. For example, the ability to measure how many consumers visited a store after seeing a mobile ad could “provide a killer attribution tool” for advertisers using the Verzion-AOL ad platform, according to Kantrowitz.

AOL’s focus on ad tech represents a different approach from competitors like Yahoo! Inc. YHOO which focused resources on increasing content.

Kantrowitz noted that a “few years ago, AOL and Yahoo were sitting in essentially the same place. Both had plenty of visitors but sold commoditized ad inventory which limited the value of their businesses.”

Yahoo, however, “invested in content, snatching up Tumblr and a number of other companies until going on an ad-tech spending spree with the acquisitions of mobile ad-tech company Flurry and video ad-tech company Brightroll.”

Kantrowitz concluded that AOL, by comparison, “went straight for ad-tech, building a full ‘stack’ while paring down its content business. AOL's strategy, today at least, seems like it was the right one.”

Verizon Communications Inc. recently traded at $49.73, up 0.22 percent, while AOL, Inc. traded at $50.77, up 0.49 percent.