Microsoft-AOL Deal Affirms Verizon’s Interest In Cross-Platform Media

VerizonWhile AOL’s absorption of Microsoft’s display, search and video ads business is indicative of Verizon’s digital media interests, industry insiders aren’t quite convinced the flagship publications it inherited through the AOL acquisition will stick around for the long haul.

An early Huffington Post exec said Verizon will need to treat the media group like “a very premium content experience” in order to justify keeping it and to avoid bleeding key talent.

“If they treat it like generic content as you can imagine a Verizon doing, it’s not going to go well,” the former executive said. “But if they give HuffPo a clear budget and clear economy and get out of the way, it can be a tremendous asset for them.”

Gartner Research Director Martin Kihn added the Microsoft deal, revealed Monday, “makes AOL look less like a publisher and more like an ad network, so … it’s hard to believe a phone company would want to stay in the news business.”

But for the time being, Verizon is paying lip service to digital media monetization. During a recent panel discussion at the JW Insights conference in New York, Ted Middleton, chief product officer for Verizon Digital Media Services, implied Verizon would continue to pursue content monetization.

The Huffington Post, for instance, expanded its video strategy to include the 24-hour video network HuffPost 24, featuring short-form video and live programming for desktop, connected TV and video on-demand, with brand sponsorship opportunities.

“Verizon/AOL has an opportunity to be a third major digital media and ad tech aggregator after Google and Facebook, though they will have a lot of competition from the likes of Alibaba and Tencent,” noted Dave Morgan, who sold TACODA to AOL in 2007 for $275 million, and now runs TV audience platform Simulmedia. “I suspect that … adding the Microsoft inventory and sales team will help, though that alone certainly won’t make it happen on its own.”

Last week, Verizon confirmed the summer release of an over-the-top (OTT) video service, a mobile-first offering some AOL insiders compared to Hulu, with free, ad-supported and video subscription models.

Adding Microsoft’s Xbox and Skype inventory would be consistent with the direction of Verizon Digital Media Services, whose president Bob Toohey now reports directly to AOL CEO Tim Armstrong.

Verizon is well-positioned for OTT delivery, thanks to OnCue, an IP-based TV company it inherited when it bought Intel Media last March. Lest anyone forget, Microsoft has inventory and audience scale through its flagship OTT product Xbox One.  According to Scott Ferber, CEO of Videology, Microsoft’s inventory could help shore up more premium content without incurring the upfront costs of buying rights to that content.

Moreover, sources indicate strong parallels to AOL’s video ad technologies. and AOL ONE could gain new inroads to cross-screen inventory, and secure new activations across MSN, Outlook Mail, or the like via Microsoft’s display and video supply.

“I’m not really sure what to make of [the Microsoft deal] aside from a score for AOL- Verizon getting an additional source of inventory to plug into,” added Richard Joyce, a senior analyst at Forrester. That said, “I’m not sure you can look at Microsoft inventory the same as AOL’s properties, since it’s a similar arrangement [to what they have] with AppNexus, or so it seems.”

“There’s increasing consolidation on the media side with Google and Facebook and a scramble for third place among a half-dozen players,” Kihn noted. “This deal is a bet that Verizon/AOL can be that No. 3.”

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