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Why the future of mobile video could be in Verizon’s hands

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Kirill Kniazev

AOL helped bring the internet to the masses and after a serious slump- they’re back. Here’s how they plan on changing mobile video.

Beginning life as an under performing computer gaming service, America Online quickly became the largest internet service provider in the US. Their journey of being at the forefront of transforming mobile video is a fascinating one.

From its lowly beginnings as a clunky interface with horrendously slow dial-up speeds, there was always something endearing about AOL.

Initially delighting, later tiresome, that familiar voice of ‘You’ve got mail’ was for many, their first experience of the virtual world.

Previously, the internet was the domain (no pun intended) of the technophile, and by appealing directly to the general public, Steve Case shepherded millions of people in the direction of email and instant messenger.

AOL’s rise to the top culminated in what Time Warner chairman Jeff Bewkes brandished “the biggest mistake in corporate history” with the two corporations merging for an, even by today’s standards behemoth $164 billion.

Shortly after the internet bubble burst, AOL Time-Warner’s stock plummeted and Case quickly became one of the most scorned executives in US history.

AOL have certainly had a rollercoaster ride, yet despite the ebbs and flows, what shouldn’t be overlooked is the democratizing effect that AOL had on bringing internet to the masses.

One thing they historically haven’t been associated with however, is innovation.

And if you were to watch the following advert and be told that 20 years on, AOL would be leading the pack in transforming mobile video, arguably cracking the case that has plagued publishers for years- namely how to monetize it, you’d probably need to briefly have a sit down.

Transforming mobile video- the big plan

Yet that’s exactly what Tim Armstrong has had in the pipeline for a number of years, transforming mobile video by connecting publishers with brands.

Armstrong made this apparent in an internal memo after Verizon’s acquisition of AOL and said: “The future of nearly all media- and consequently, all advertising- is on our phones”

Eric Lawson-Smith of Arma Partners, one of the world’s leading mergers and acquisitions firms explains where the move has come from in an interview with Hot Topics, and how AOL plans on transforming mobile video.

“I advised on the sale of a company a few years ago to AOL called Go Viral, which was a social video advertising platform…at the time, AOL itself was the subject of fairly profound transformational initiatives by Tim Armstrong…they were morphing into a next generation digital play”

“The motivation behind Verizon in particular, is this explosion of video being used online…Netflix is forecast to hit 330 million subscribers by 2020.”

The consumption of video has certainly skyrocketed in recent years, with Cisco suggesting that video traffic by 2018 will account for 79% of all consumer internet traffic. More and more of which is mobile.

Disruptive OTT platforms for example such as Netflix have caught legacy platforms off guard, transforming mobile video.

Such rapid growth led 2014 to be billed as “the year that television staged a jailbreak” and the runaway success of OTT platforms startled an industry who had adapted incredibly slowly to the advent of digital.

Netflix now has 53 million customers in nearly 50 countries and streams around two billion hours of TV and movies a month. A figure which is growing all the time.

Transforming mobile video has simply been a matter of working out how to make these new disruptive platforms profitable.

“Verizon have stated that they really wanted to own a video advertising capability. As such, AOL have taken two important steps” says Eric, whose firm last year brokered M & A deals in the region of £7 billion.

“They bought Go Viral, which brought them social advertising capability and video. But then, most importantly, they bought Adap.TV., who had attracted the interest of a number of advertising agencies and tech players. It was a full stack offering of video advertising.”

These two acquisitions signalled that Armstrong was gunning to transform mobile video by connecting publishers to advertisers and brands in a completely seamless way.

“One for which Tim Armstrong deserves a large amount of credit” says Lawson-Smith “Therefore, I think that the move by Verizon is strategically important in a number of different respects. Not least of which is saying that the future of video is online. And Armstrong is suggesting that if AOL are going to capitalise on this, then they really need an advertising capacity.”

Whether or not AOL and Verizon will transform mobile video, what is certain, is that at $4.4 billion. It’s one expensive bet.