AOL is reportedly in talks to buy mobile ad network Millennial Media for $300m to push its growing digital advertising business towards mobile. Millennial Media, which places publishers’ ads on mobile apps and sites, could help AOL expand its mobile advertising business. Neither of the companies have commented on the deal as of yet.
At the price tag of $300m, the deal would be a premium paid for Millennial Media. Stocks are currently trading at $1.45 a share – a market capitalisation of $217m. In September 2013, stocks traded at almost $11, but declined when the company went public. For investors, the deal would be welcome news.
Millennial Media stocks
AOL itself was recently acquired by Verizon in a $4.4bn deal, which industry experts see as a way for the telecoms operator to get more value from its customer base through AOL’s advertising technology. AOL has been trying hard to reposition itself as an ad tech company as well as content provider through a series of acquisitions such as video ad network Adap.tv and attributions firm Convertro. The company launched a set of new online ad tools and prepared for a one-stop-shop for an online ad solution. However, the Wall Street Journal writes, despite its efforts, AOL’s reputation for a strength in mobile advertising has lagged behind. Adding Millennial Media could help the company grow within the mobile ad space.
Brian Wieser, Analyst, Pivotal Research, agrees:
“This hasn’t been an area that AOL could claim much expertise in. Millennial would be an excellent fit for the legacy AOL advertising business. [It] still has significant scale in pure-play mobile ad sales and presumably would help AOL build scale market faster than would otherwise have been the case.”
Indeed, with mobile ad spending expected to reach $100bn by 2016 globally, making up 51% of all digital ad spend, AOL/Verizon will not want to miss out. Millennial Media comes with a set of good assets too. One source, close to the deal, told Business Insider that Millennial’s acquisition of mobile ad exchange Nexage, the firm that serves real-time bidding software to buy and sell mobile ads, at $108m last year makes it an even more interesting purchase. The source stated:
“Millennial Media has a good mobile footprint and a mobile exchange. I’d say the Nexage acquisition would help Millennial get bought as apps are where the money is — especially in Asia. To scale in Asia, you need an app exchange.”
Some experts have cautioned that AOL should focus on buying into a company that provides native ads as opposed to Millennial’s standard banner ad expertise. Native ads are being favoured by many mobile advertisers. However, Chia Chen, Managing Director for digital products and services at Digitas, finds:
“[Millennial would be able to offer AOL] a significant amount reach in mobile that it was kind of missing. If you take that, plug that into AOL’s ad tech and programmatic assets and Verizon’s huge ocean of data, that’s a pretty good story.”
In June this year, AOL announced that it was taking over display, video and mobile ads for Microsoft operations in a set of specific countries.