AOL, recently acquired by Verizon for $4.4 billion, appears to be wasting little time in continuing to build out its advertising business. Sources tell TechCrunch that the company has been in the process of buying mobile ad network Millennial Media.
AOL started “kicking the tires” on Millennial weeks ago, one source says, but things were slowed down by AOL itself getting acquired by Verizon. The price range we’ve heard is between $300 million and $350 million, and if the deal goes through, it will be some weeks still before it gets announced.
If the price we’ve heard is right, it would be a premium for Millennial as it stands at the moment. The company is trading at $1.45 per share as of market close today, giving it a market capitalization of $217 million.
AOL has declined to comment, and Millennial has not responded to our request for comment.
Part of the reason for AOL’s and Verizon’s interest in mobile advertising is because this is where the growth is: as the number of smartphones and tablets has continued to expand, so has consumers’ usage of mobile apps and mobile web-based services. That has had a large knock-on effect on the mobile ad market, forecast to be worth $100 billion in 2016 and 51% of the digital ad market, according to eMarketer.
Millennial Media was one of the many mobile ad startups to emerge out of that larger trend. While there was some significant consolidation happening — such as Google buying AdMob, Apple buying Quattro, and many other deals, Millennial stayed independent (and has even bought some others itself).
Millennial saw a 100% pop when it went public in 2012, raising $130 million and getting valued at $2 billion. It has, however, has failed to maintain those dizzying heights.
On the back of earnings that have fallen short of expectations and perhaps some skepticism about the company’s longer term prospects as an independent in the face of competition from the likes of Google, Apple and Facebook, Millennial has lost nearly 90 percent of its valuation since going public.
“Millennial has a bunch of good assets and some legacy bad assets,” is how one observer described the company. “They’ve been prepped for sale for some time.”
Indeed, Millennial has been the subject of acquisition rumors before, with some of those reports singling out AOL as a potential suitor.
An acquisition of Millennial would underscore a bigger strategic move at AOL (and now, Verizon) to continue building out its digital ads business, with more mobile services, both on the back of its own content operations (AOL/Verizon own TechCrunch, Huffington Post, Engadget and a number of other online and video properties) and for third-party publishers.
Mobile is an area where both AOL and Verizon — with its vast network of 130 million+ mobile subscribers on Verizon Wireless — have already been betting big. Expanding in mobile advertising in fact was seen as one of the key reasons behind the purchase of AOL in the first place.
AOL already has assets in the mobile advertising space — for example, by way of Third Screen Media (which it acquired way back in 2007) — and clearly it now wants to be doing more.
There has been some speculation over what kind of investments Verizon or AOL would be making to build out that business, but one concrete example of how it’s growing can be seen in the recent outsourcing deal between AOL and Microsoft.
Announced at the end of June, AOL is taking over display, video and mobile advertising for Microsoft’s operations in the United States, the United Kingdom, Canada, Brazil, France, Germany, Italy, Spain, and Japan, covering ad inventory on properties like the MSN Homepage, Outlook Mail, Xbox, Skype and ads in apps.
That increased activity could also be one reason why AOL would want to ramp up its business with Millennial Media’s ad network.
Curiously, was there some inadvertent writing on the wall about this transaction? Last week, Millennial put out this statement about equity grants to six unnamed employees as part of retention packages, “being made as a material inducement to employees entering into employment with Millennial Media in connection with the acquisition transaction.”