Verizon Seeks To Future-Proof Its Online Video Strategy

The May 12th decision to purchase AOL is a bold statement of intent by Verizon. Subject to regulatory approval, the $4.4 billion purchase will provide America’s largest Wifi carrier and significant Internet & TV provider with a crucial competitive edge in the emerging battlefield of OTT. John Stratton, Verizon’s newly appointed EVP & Operations President for its wireless and wireline division has publicly stated that the newly strengthened company is now “in the TV Business.”

The AOL purchase gives Verizon access to the AOL advertising platform with its above-the-network layer of revenue generating capabilities. AOL has focused on creating a market leading unified advertising experience for advertisers across display, video, mobile and TV. And advertisers are responding to this cross screen focus with revenues rising 7 % in Q1 of 2015. It is this targeted multiple screen revenue optimisation know how that Version needs in order to secure the success of its impending OTT service.

Why OTT Matters

Last month Verizon announced that it will launch a video service in summer 2015 for mobile devices. Mobile video is where millennial content mindshare is and hence where Verizon needs to be in order to remain relevant to its customer base. Despite being a direct competitor with Verizon’s existing FiOS linear video service, a compelling OTT service is essential for the company’s continued growth. Without it, Verizon’s younger customers will start to shift to rival offerings that do provide this functionality. To a mobile viewer, linear TV has lessening appeal due to the fragmented and lifestyle orientated experience of Smartphone usage. A mobile video user expects to consume in short bursts at a time of their choosing. It is imperative for a telecom company to able to provide this level of functionality to their customers.

Where Future Revenue Will Come From

With the inexorable shift to mobile content consumption come huge new revenue stream opportunities. Verizon’s partnership with Facebook to offer premium NHL video content is one example of leveraging mobile engagement through targeted sponsorship. However with the acquisition of AOL, Verizon is now in a position to directly monetise its mobile video content by offering mobile advertising functionality to advertisers. A combination of AOL’s knowhow and Verizon’s installed mobile customer base will make it an attractive proposition to advertisers keen to target younger audiences. The AOL acquisition in addition to the 2014 purchase of Intel's OnCue platform enables Verizon to move beyond being a triple play telco provider and into the mobile video space where it can leverage its inbuilt and acquired competitive advantage. This Investment in OTT is an investment in Verizon’s future role in the rapidly growing US mobile video marketplace.