Much ink has already been spilled over the Verizon-AOL merger and its many implications. These implications can be broken down into three categories: short-term, midterm and long-term.
In the short-term, Verizon has expanded its media offerings and its user base. It has gained wider reach in its battle with competitors, such as Comcast, over the future of America’s media and communications services.
In the midterm, many industry pundits have focused on the value that AOL brings to Verizon’s ad tech stack. For example, combining the location data Verizon collects via its wireless network with AOL’s digital ad delivery could make reliable cross-channel ad delivery and attribution a reality by showing how digital ads impact real-world behavior.
Bringing this kind of service to fruition will take some time, thanks primarily to the complicated process of merging the two companies. But it’s where most have pointed to justify AOL’s approximately $4 billion price tag.
Long-term, it’s been said that the deal is about “the data.” That is, the data that both companies bring to the table, which can be used to enhance ad delivery and targeting. This is essentially a rehash of the ad tech perspective – AOL may have limited value to Verizon as a media company, but it’s a big draw for a company with a huge customer base that is looking to reach (and monetize) its assets more effectively.
While all of these interpretations are correct in the sense that they capture legitimate motivations, they are missing the forest for the trees. In other words, the deal wasn’t really about any particular technology or capability, it was actually about the value that is now inherent to first-party data.
It’s hard to imagine that Verizon would pay $4 billion for AOL, based on the value of its technology and third-party data alone. Many others in the space offer similar programmatic platforms that could be acquired for far less.
Similarly, while AOL’s media properties are numerous, most industry estimates place their value below $1 billion, far less than Verizon ultimately paid. More likely, Verizon has realized that simply having access to AOL’s massive troves of consumer data is tremendously valuable by itself, especially at a moment in time when the room for growth in cable and mobile service is dwindling.
What makes first-party data so inherently valuable? At this point, it’s clear that most if not all of the ad tech that Verizon currently has access to will be obsolete within a decade, if not sooner. However, it’s almost certain that the most effective ad tech will continue to be powered by first-party consumer data for the foreseeable future.
Further, as data-driven business decision making moves into the mainstream, consumer data gives enterprises a powerful advantage against their competitors – and its importance will only grow over time.
Finally, given the speed of innovation in this space, it would surprise no one if new, valuable applications for consumer data emerged over the next few years. To put it simply, Verizon is positioning itself now for the economy of the future.
We’ve reached a point where the vast majority of U.S. consumers have a cable box, Internet connection and mobile device. There is little room left for major growth in this area. As companies like Verizon, Facebook and Google, which started in different spaces, converge and compete against one another, the common denominator that determines success will be data.
With news emerging of a new Time Warner takeover bid, we’re just scratching the surface of a new M&A trend, driven by data acquisition rather than specific technologies.
Ultimately, forward-thinking companies should be looking to collect and utilize as much first-party consumer data as possible, from as wide a variety of channels as possible.
Data will be fueling marketing, advertising and business decision making for many years to come, and a robust data collection program will ensure you don’t miss out on anything.