Verizon's AOL business reportedly considering buying mobile ad firm Millennial Media for up to $350M

Verizon's (NYSE: VZ) AOL subsidiary is interested in purchasing mobile ad company Millennial Media, according to a report from TechCrunch citing anonymous sources with knowledge of the talks. The move would be noteworthy as it would increase and expand Verizon's advertising technologies following the operator's recent purchase of AOL and the company's programmatic advertising service.

The Wall Street Journal also reported that AOL and Millennial Media are holding acquisition talks. 

According to TechCrunch, AOL has been eyeing Millennial Media for weeks with a purchase price of between $300 million and $350 million, but its plans to purchase the mobile ad firm were delayed by Verizon's acquisition of AOL, which closed in June. TechCrunch said an AOL purchase of Millennial Media might now move forward, though the publication cautioned that any announcement is likely weeks away.

AOL representatives declined to comment, according to TechCrunch, and representatives from Millennial Media did not respond to requests for comment.

Interestingly, Millennial Media was founded by Paul Palmieri, a former Verizon Wireless executive. Palmieri stepped down from the CEO role at Millennial Media early last year and was replaced by current CEO and former Yahoo executive Michael Barrett.

Verizon announced in May it would purchase AOL for $50 per share, or approximately $4.4 billion. The acquisition gives Verizon a jump-start in the online advertising and video market by giving the telecom heavyweight access to AOL's technology and video content, as well as AOL's programmatic advertising technology for video ads. Verizon executives have talked about their intentions to launch a mobile and online video offering this summer; the company's AOL deal will likely support that effort.

If AOL buys Millennial Media, that could give Verizon even more advertising reach. Millennial offers mobile advertisers the ability to touch more than 670 million monthly unique users, including over 175 million monthly unique users in the United States alone. Around 65,000 apps are enabled to receive ads through the company's platform, and Millennial delivers ads on over 9,000 different mobile device types and models. "We have developed more than 750 million proprietary, anonymous user profiles that we can use to more accurately and efficiently target ads," the company said in its most recent quarterly filing with the Securities and Exchange Commission.

Millennial posted revenues of $63.2 million in its most recent quarter, down 13 percent from the $72.6 million it scored in the year-ago quarter. The company blamed the decline on "decreases in revenue from several large app download advertising clients in 2015 versus 2014."

"Mobile has already won the battle for consumers' time and attention and the big ad dollars are beginning to follow," Millennial's Barrett boasted during the company's most recent conference call with analysts, according to a Seeking Alpha transcript of the event. "Trends like viewability will accelerate the shift since mobile in app performs much better than display or even mobile web. As marketers shift to more viewable media, Millennial is well positioned to capture a larger share of these dollars."

"Millennial has a bunch of good assets and some legacy bad assets," one observer told TechCrunch. "They've been prepped for sale for some time."

TechCrunch noted that Millennial Media is one of the few remaining independent mobile ad firms--Apple purchased Quattro in 2010 and Google purchased AdMob in 2009. But Millennial's position continues to remain tenuous; the company's stock has declined from almost $20 per share in 2012 when Millennial went public to around $1.85 per share today.

Further, as TechCrunch noted, AOL may be interested in bulking up its mobile ad position following its announcement last month that it would take over Microsoft's display, video and mobile advertising operations in the United States and a handful of other countries.

According to research firm eMarketer, Millennial's share of the U.S. mobile ad market (which is on track to reach  $28.7 billion this year) was just 0.4 percent last year, down from 0.7 percent in 2013. EMarketer said Millennial's share of mobile display revenues inthe United States dipped to 0.9 percent in 2014, from 1.5 percent in 2013, even as the overall market increased 82 percent to $9.6 billion.

For more:
- see this WSJ article
- see this TechCrunch article

Related articles:
Verizon signs Scripps deal for upcoming mobile video service
Verizon's ad-supported OTT pricing may signal new business models to come
Verizon's OTT mobile video service will support sponsored data
Lowenstein's View: What's next for Verizon?

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