AOL’s Sale to Verizon: All Eyes on Mobile and Video

Verizon’s announcement today that it will buy AOL for $4.4 billion is a bid to get beyond dumb pipes and airwaves to get deeply into mobile and video. By doing so, Verizon, a $200 Billion company,  hopes to play on more of a level playing field with other major telecom players combining access to content and personalization services, especially Comcast (with NBC U) and  AT&T (with Direct TV.)

The all-cash deal provides a 150 percent return for shareholders in AOL from when CEO Tim Armstrong came on board in 2009. The price is 17 percent above the current stock price. And at the lower price – which may ultimately be even lower if some of the content properties are sold – a lot less is riding on it.

Have you seen this movie before in 2000, when AOL was disastrously sold to Time Warner for $165 Billion?  A lot of the same synergies are being discussed:  video on demand, personalized content and subscription revenue.

But this time, it is really all about mobile; video on mobile; and the prospect of converting (or selling) 2.1 million dialup subscribers that continue to be AOL’s biggest moneymaker. Indeed,  AOL has built or bought a powerful arsenal of mobile ad serving and video tech, especially LTE Multicast, which uses its cellular network to broadcast live video.

In our view, content is not likely to be an important factor here.  It would have been more important if AOL had merged with Yahoo, or with Microsoft.  The biggest “what if” probably involves MapQuest, which has technically lagged behind mapping leaders but retains a powerful, verb-like brand in that space.  Given Uber’s $3 Billion bid to buy Nokia’s HERE, it may ultimately emerge as an important factor in the deal – much more so than Huffington Post.  AOL’s sizable effort to make Huffington Post into a super content portal, including a major local dimension, failed dramatically last year. Similarly, Armstrong’s huge, multi-hundred million dollar effort with hyperlocal site Patch amounted to very little.

To some degree, we also see Verizon’s acquisition of AOL as an acqui-hire. Verizon has  stumbled around advertising for several years but not had an impact. It also has made some small investments in content and classified properties, but hasn’t been confident enough to really spend. Its biggest effort was a promotional program with the NFL to broadcast games for free.

We like the statement issued in the name of Verizon CEO Lowell McAdam, who we note, has long had his eye on geotargeted advertising. “Verizon’s vision is to provide customers with a premium digital experience based on a global multi-screen network platform. This acquisition supports our strategy to provide a cross-screen connection for consumers, creators and advertisers to deliver that premium customer experience.”

Uber’s $3 Billion Bid for Nokia’s HERE: Too Much, Too Soon

As my colleague Mitch Ratcliffe points out, Uber is apparently bidding $3 billion to buy Nokia’s HERE mapping service (which was formerly NAVTEQ.) It is a huge bid that comes out of left field. But does it make sense?

A case could be made for it. Uber seems especially eager to juice its valuation before the IPO. It wants to reposition itself as an ecommerce leaders and move away from its current reality as a collection of freelance drivers. Moreover, the number of mapping competitors that it could partner with is definitely shrinking. It comes down to Google, Microsoft and perhaps, MapQuest.

If successful, Uber would control a highly customizizable mapping service that would provide shortcuts and accuracy for its deliveries of people and it hopes, commerce. HERE’s international orientation is appealing for Uber, which is a true worldwide play.

Owning HERE would especially be helpful in the next age of driver-less, autonomous vehicles (AVs), which would be highly dependent on accurate, strategically efficient information. Deep mapping is also an area that Google and Microsoft have ID’d as their competitive advantage. Watching Yelp keep its advantage against Google while depending on its search engine is enough proof to realize that depending on Google as a common carrier isn’t an ideal strategy.

But this age of AVs isn’t likely to occur for 10 years or longer. And only small items like toothbrushes and shaving cream are being delivered by existing Uber drivers. While it has aspirations and vision aplenty, it isn’t yet an ecommerce company. When/if it becomes one, a whole new set of competitors come into play (Fedex, UPS, USPS, Amazon, WalMart , Safeway).

We applaud the vision, and don’t count Uber out at all. The competitors listed above could as easily become major partners. In fact, this could be the biggest play of all. But the idea that Uber should spend $3 billion — which would only be a down payment on the high maintenance mapping industry — seems like it is too much, too soon. Google is likely to be a perfectly good and safe partner for a number of years.

UT San Diego Sale: Online Isn’t Adding Value to Traditional Media Sale Prices

Today’s announcement that UT San Diego and its eight regional publications will be acquired by Tribune Publishing’s Los Angeles Times for a slightly better-than-fire sale price of $85 million (plus $100 million in pension liabilities) points to several things.

1. The price is probably a flat fee for the brand and expectations of selling regional advertising throughout southern California.
2. Individual components such as subscriber counts include a certain number of online subscribers. But there aren’t many online-only subs in this case.
3. UT San Diego’s various online and mobile services really aren’t factored in.

The U-T reported Sunday circulation of 271,564 for 1Q, 2015. On other days, circulation ranged between 169,484-222,479. The LA Times reported Sunday circulation of 965,598 and average weekday circulation of 650,718 for the six months that ended Sept. 30.

The LA Times will be able to save some costs with the acquisition by cutting circulation, printing, sales and perhaps, content costs. It will also more effectively sell regional accounts to large advertisers, specifically retailers, auto makers and auto dealers and medical. But in the end, online (or mobile) won’t be much of a factor.

That’s a shame. Back in 2002-2004, a former colleague of mine developed a general hypothesis that if a traditional media property could show recurring value in online properties, it would be able to boost its sale price by X percent – probably 20 percent or more. It was a major reason to double down on digital growth. But this clearly hasn’t happened.

I was chatting about this with BIA/Kelsey Chief Economist Mark Fratrik. He notes that online revenues accounted for 16.4 percent of newspaper revenue in 2014, and will be 17.9 percent in 2015. The forecast is for online revenues to grow slightly to 22.9 percent by 2019. This reflects some additional online revenue, but as he points out, it also reflects BIA/Kelsey’s expectations that print revenues will decline.

It is true that online could add value to traditional value property in some cases, says Fratrik. But San Diego is full of online competition from TV station sites, alternative sites and news start-ups.

The Times of San Diego, for instance, now reaches 150,000 unique users a month. Publisher Chris Jennewein – a former leader of UT San Diego’s digital operations – notes that 26 percent of his readers are aged 25-34 and seventy-five percent are under 55. “Our readers probably didn’t read either of the two newspapers to begin with,” he told me this morning via email.

For me, it is a sad situation. I lived in San Diego for 11 years, and occasionally did consulting projects for the newspaper. UT San Diego always had innovative online projects going on, and several strong leaders at the digital helm. It got deeply involved in email marketing services, online directories, Spanish language media, hyperlocal editions, premium iPad editions, video services, mobile headlines, entertainment publications, prepaid deals and loyalty services. But in the end, none of it seemed to matter very much.

Bookshelf: ‘The Internet of Things’


Last year, like millions of others, I bought a Nest thermostat. It is connected to my WiFi, and I can use its iPhone app to turn off the heat from the Airport. It also knows if we aren’t home, and shuts down to 58 degrees when we don’t walk by it every two hours.

A few weeks ago, I went a little further, and bought a Rachio, a lawn sprinkling system that integrates with the Nest. It tracks the weather via the Web, and adjusts my backyard watering stations based on precipitation and heat. And then I jiggered it, so that I can use its iPhone app to turn on the lights on my stairway when I am arriving home after dark.

I don’t have a self-driving car yet, or keyless home entry. And I don’t get too close to the military’s drone program. But those are all in the family, too. As are the Apple Watch and Google Glasses.

The Family, of course, is known as “The Internet of Things.” What it consists of are devices that combine tools with automation and radio sensors and data from the Cloud and the Web.

The Nest story became especially interesting to us in business when Google bought it for $3.2 Billion last February, and its leaders became the head of Google’s new Internet of Things division. At the time, it seemed like a stretch. But the Nest division keeps growing (Carbon Monoxide detectors, etc.) IoT might just be driving the next generation of efficiencies. Intel and other tech giants have similarly- named divisions.

Samuel Greengard, a writer for CMO.com and other thought-leader publications, has penned a handy new book for MIT Press called “The Internet of Things.” It nicely covers the history of IoT’s development from the Industrial Internet to the Internet of Humans to the Internet of Everything. The book connects the dots on where IoT can go, and also provides fair warning on the things that can go wrong (and we aren’t just talking about Google car crashes in San Francisco).

The 210 page paperback ($12.93 on Amazon) has a good glossary, a nice bibliography and is a fast read. And you’ll see why BIA/Kelsey conference speakers in coming years are perhaps as likely to come from Honeywell and Rain Bird as they are from NBC-U, Comcast, Google, Facebook,Intel and Microsoft.

(Here’s a question: If you worked for Google, would you rather work for Nest, or AdWords?)

Facebook Focuses Hard(er) on Small Business

Facebook is felt by some to have the potential to dominate SMB online advertising because of its incredibly high organic usage. But the challenge to drive even more SMB advertisers remains. The company currently reports that it has 40 million SMBs with Facebook pages around the world. Two million SMBs are paid advertisers, or five percent of its SMB page holders.

Today, Facebook unveiled several new small business support programs that it hopes will boost its SMB conversion rates. These include a series of local SMB events, the launch of self serve tools and chat and email support.

We got a hint of what was to come during the March 25 keynote by Facebook Director of Small Business Jon Czaja at BIA/Kelsey National in Dallas. During his keynote, Czaja emphasized that Facebook can lift sales results for SMBs by a high percentage if it is added to traditional media ad campaigns.

He also asserted that Facebook does well on its own. He noted that Facebook’s accuracy for narrowly targeted online campaigns is 89 percent, or more than twice as high as the industry’s 38 percent average. Advertising on Facebook provides $8 back for every dollar invested, and a 12x boost in conversion, Czaja suggested.

While Facebook heavily emphasizes self serve for SMBs because they demand it, it is also eager to partner with agencies and others, adds Czaja. “Facebook can’t build everything itself. If there are other partners out there to build on our platform and encourage better performance, then advertisers will be able to choose to go to Facebook or an agency. It’s an ‘All-of-the-Above’ strategy.”

Signpost Raises $20.5 Million to Provide CRM-Based SMB Services


Signpost announced today it has raised a new $20.5 Million round, which will let it build out an evolved, CRM-based “close the loop” strategy of tracking SMB digital sources via transactions, social media, websites and email.

The current round has been led by led by Georgian Partners along with Spark Capital, OpenView Venture Partners, Scout Ventures and Jason Calacanis’ Launch Fund. The company has raised $36.5 Million since its founding in mid-2010. Earlier funders included Google Ventures.

Signpost’s evolution has been a dramatic one, fully reflecting the changes in local online marketing. The company launched as a provider of sales agents for local SMB deals, then evolved into an SMB-oriented SAAS company with offices in New York, Austin and Denver. In its case, deals gave way to a broad range of marketing services, including analytics, marketing automation, loyalty marketing, referrals and review acquistion.

The company now serves over 10,000 customers, and says it is eyeing a large customer set of six million very small businesses with 2-10 employees. Most of these have not previously had access to CRM and are unlikely to subscribe to pricey CRM tools such as Salesforce.

The inclusion of financial transaction information provided by a third party is something that is increasingly being added to marketing services. Google, ForwardLine and others similarly incorporate financial transaction information.


BIA/Kelsey Managing Director Rick Ducey, Signpost’s Ryan Sommer and Peter Krasilovsky play “Chinese style.”

ReachLocal Now Captures SMB Leads from Across the Web

Leads are coming from everywhere, and the digital marketing firms have adjusted to this reality. ReachLocal, for one, has now opened up its ReachEdge lead conversion and marketing automation software. It now has the capability to track leads and other activity from a wide variety of unassociated marketing sources.

Chief Product Officer Kris Barton briefed BIA/Kelsey on the ReachEdge’s evolution, noting that the company’s efforts to increase transparency and simplicity will ultimately boost conversion rates. Barton says that “decoupling” the software is the direct result of customer input. Some customers, for instance, had invested in redesigned website and didn’t want to have to abandon it in order to sign up with Reach.

The new version of ReachEdge is $149 a month and includes a free trial. It also features plug-ins for publishing systems such as WordPress and Drupal. The software has also been enhanced for mobile. Customers can use their phones to receive emails and text alerts. It also has integrated reports that are “focused entirely on ROI” and are much clearer than Google Analytics, says Barton.