Why the Verizon-AOL deal just might work: Mobile video ads are worth a lot

For many onlookers, Verizon’s $4.4 billion acquisition of AOL echoed another multibillion dollar deal -- AOL's own $162 billion acquisition of Time Warner more than 15 years ago. That deal famously collapsed before the end of the decade. But Verizon’s move may differ because of one salient fact: there’s a ton of money in the video advertising being increasingly watched on mobile devices.

"AOL was in no position to monetize Time Warner Online properties last time around," said Rebecca Lieb, of the Altimeter Group. "Time Warner, in essence, bought what was then an Internet service provider. The thinking was ‘this Internet thing is going to be big,’ but beyond that there was little synergy. This time around, an ISP, Verizon, is buying a former ISP. AOL is no longer an Internet service provider or a portal. It's an advertising technology company." From a contrarian perspective, even AOL’s mobile advertising technology may not help Verizon compete with juggernauts like Google. And mobile ad spending can’t possibly continue to grow at such staggering rates forever. In today's mobile ad gold rush, AOL still only has a tiny slice of the worldwide digital ad revenue. Which line of thinking will win out? Analysts seem to lean more toward optimism. "The legacy telecom companies realize that as they try to develop new avenues for growth -- in Verizon’s case via digital content such as video delivered through FIOS, Verizon Wireless, and as an over-the-top service available via any broadband connection -- effectively monetizing those services will be a critical part of the profit equation," said Bill Menezes, an analyst with Gartner. "Verizon needs to become more like the companies that successfully have created core digital content and ad businesses -- Google and Facebook notably -- and the AOL platforms are a part of what they need to make that happen."