How AOL Became So Dominant in Online Video and Why Verizon Cares

NEW YORK (TheStreet) — As cord-cutting becomes the new reality, television and telecoms have to reconcile their distaste for the shift in media consumption to digital if they want to retain any control over it. 

This means less scoffing at the idea (like Fox did when it hired Rob Lowe to mock online ads at its UpFront event), and instead applying a more proactive approach like that of Verizon
(VZ – Get Report), which acquired AOL
(AOL – Get Report) yesterday for $4.4 billion and took another step in meeting people where they are when it comes to media consumption — the Web.

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If you’re scratching your head at the $4.4 Billion price tag, or that AOL, a company that made most of its wake on dial-up modems, even still exists, then you’re not alone. But let me remind you that AOL owns some pretty huge Web properties such as the Huffington Post, TechCrunch, and Moviefone to name a few. AOL boasts that its ads reach 96% of adults over 50, and also 77% of affluent adults who spend 16 minutes per day when visiting one of its properties. Further down the list is its audience of millennial visitors, clocking in at 53 million a month, which while not too shabby, certainly leaves room for improvement.

Verizon’s power-play for AOL is not for its properties as much as its online video capabilities. AOL is a video juggernaut ranked 3rd just behind Google and Facebook at serving up desktop content videos to unique viewers per month, and 4th behind some lesser known competitors at serving ads that reached 41.9% of the U.S. Population in March, all via ComScore.

AOL managed to reach so many people with video through a combination of syndication and programmatic advertising acquisitions. AOL bought 5min Media in 2010, a platform that helps « reinvent the cable network online » by placing high quality do-it-yourself type videos from reputable media companies everywhere on the Web. And  in August of 2013, AOL purchased video advertising platform, which is an automated marketplace between Web sites looking for advertisers, and advertisers looking for Web sites. In the same month that AOL bought it actually dwarfed Google in serving up video ads, running 3.72 billion videos to reach 50% of the video viewing population in the U.S.

As T.V.’s audience and advertising budgets decline, we’re consistently seeing increases in online advertising budgets from larger clients at the digital marketing agency of which I am CEO. This dovetails with the thoughts of Verizon CEO Lowell McAdam who said of the AOL acquisition, « At Verizon, we’ve been strategically investing in emerging technology…that taps into the market shift to digital content and advertising. » Verizon is simultaneously planning on offering trimmed-down cable packages, as well as planning an online video service this summer. All these moves seem to play into the narrative of television’s ending supremacy.

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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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