What does Verizon’s AOL buy have to do with the internet of things?

May 12, 2015, 7:47 PM UTC
Views From The Consumer Electronics Show
Lowell C. McAdam, chairman and chief executive officer of Verizon Communications Inc., pauses during a keynote address at the 2013 Consumer Electronics Show in Las Vegas, Nevada, U.S., on Tuesday, Jan. 8, 2013. The 2013 CES trade show, which runs until Jan. 11, is the world's largest annual innovation event that offers an array of entrepreneur focused exhibits, events and conference sessions for technology entrepreneurs. Photographer: David Paul Morris/Bloomberg via Getty Images
Photograph by David Paul Morris —Bloomberg via Getty Images

Nestled in Verizon’s press release trumpeting its $4.4 billion plan to acquire dot com dinosaur AOL is a sentence that says the deal will help somehow with Verizon’s Internet of thing’s platforms, which might strike normal readers as a bit confusing. Some may be wondering what the Internet of things is, and why the phrase is creeping into everything lately. The concept is the latest business jargon, but beneath that is a real trend—namely, that ubiquitous connectivity and cheap sensors are allowing consumers and businesses to connect a variety of devices and gather reams of data at a pace that we’ve never known.

This data is effectively letting us put everything from our food intake to factory performance online in a format that can be searched and analyzed, much like we can with social media and text-based content. The implications of this are enormous. So what does this have to do with Verizon buying AOL? That’s less clear. The press release actually says, “The agreement will also support and connect to Verizon’s IoT (Internet of Things) platforms, creating a growth platform from wireless to IoT for consumers and businesses.”

Broken into normal English, the AOL assets will somehow tie into the products Verizon calls its IoT platform, so consumers and businesses can build services and applications that use Verizon’s IoT and wireless products. A cynic might read that and say, Verizon bought AOL so its customers could use it. But what specifically is Verizon buying? My colleague Erin Griffith pointed out that AOL’s most interesting asset for Verizon is its advertising technology, a series of acquisitions that the company has made that help it segment and target digital advertising to the right person on mobile devices.

According to a January AdAge article the AOL ad platform, known as One, consists of a platform cobbled together by acquisition:

The company’s ad-tech strategy hinges on putting together complementary technology pieces. Over the past year or so, AOL snatched up Adap.tv for programmatic video ($405 million), Gravity for personalization ($83 million), Convertro for attribution ($101 million) and Vidible for video distribution ($50 million).

A spokesman hardly shed more light on the topic, offering only, “We mentioned it in the release from the standpoint that we do expect AOL’s advertising technology capabilities to be central to expanding our [over-the-top] video and IoT services. I don’t have any further details to offer at this time, however.”

But what is clear is that advertising on mobile devices is broken. Smaller screens don’t take to banner or display ads well, which is why we’re seeing the rise of product placement and native advertisements. At the same time that companies are trying to figure out how to better deliver impressions on a mobile device, they have access to more and more information about the user. Advertisers have the richest information source on a mobile device and a broken delivery model.

AOL’s platform could help fix this by adding more data and context that could in turn, drive different ads that play better on mobile devices. With the use of beacons in stores and a voluntary opt-in by a consumer, it’s possible to know where in a store a person is within a few feet. Data from fitness-tracking apps can share what types of exercises people do and when they are most active. Information from connected vehicles can tell you what routes people travel to work and what they listen to while they travel there.

“From an IoT point of view [this deal] makes the advertising better,” said Chetan Sharma, an analyst. “You’ll have sensors and beacons that help you understand the movement of a consumer and you can combine that with the data Verizon already has and then you can build an effective profile of a consumer and provide even better targeting.” Sharma, who is president of Chetan Sharma Consulting, added that AOL’s ad technology will benefit from Verizon’s sensors and data to deliver more target advertising and better profiles.

So that customer in the shoe section of a local retailer might get information from that retailer, but she might also get a video from the same children’s band her kid was listening to in the car, so she could complete her shoe purchase in peace and maybe pick up a few other items to go along with it. Such a model benefits the retailer, the distributor of the children’s music and possibly the harried mother.

That’s the beauty of the Internet of things. In theory it is holistic, but to make that theory reality, vendors will have to deliver holistic platforms. Verizon’s AOL buy could start offering that if it attempts to keep the AOL One platform open as opposed to limiting it to Verizon’s subscriber base. So, for now, we’ll have to wait and see if Verizon is really serious about bringing new advertising to the internet of things or if it was merely tossing in today’s hot new buzz word as a way to justify the deal.

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