Consumers’ growing love affair with watching video on smartphones and tablets is at the heart of Verizon’s (VZ) $4.4 billion acquisition of AOL (AOL).

That’s because AOL, even though it remains a top Web destination, developed online advertising technology Verizon can use across mobile and broadband services to compete with Google, Yahoo, Facebook and other Silicon Valley companies that are further ahead in the business.

“This is really about AOL’s advertising platform,” says Roger Entner, an industry analyst at Recon Analytics. “It’s one of the few working video advertising platforms out there. Verizon bought it for a relatively cheap price.”

Verizon is offering $50 a share for AOL, 17% more than AOL’s closing price Monday. AOL closed at $50.52, up almost 19% Tuesday. Verizon finished at $49.62, down less than 1%.

AOL’s technology makes it easier for ad agencies, publishers and brands to get ads in front of the most appropriate customers on video and publisher sites across desktop, mobile, tablet and TV. Though AOL is better known for its dial-up Internet access service and several media sites, including The Huffington Post, the company’s largest source of revenue is its advertising technology business it has developed through key acquisitions in recent years.

Revenue for AOL’s “platforms” unit, which includes the sales of ads delivered to publishers’ sites using its automated advertising technology, grew 21% to $280 million in the first quarter. The “brand” group, which includes its media sites, reported an 8% revenue gain to $193.4 million.

“Certainly the subscription business and the content businesses are very noteworthy. For us, the principal interest was around the ad tech platform,” Verizon President of Operations John Stratton said at an industry conference Tuesday.

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SOURCE: Mike Snider and Roger Yu
USA TODAY