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Why Verizon coveted AOL's ad technology and mobile video

Web pioneer has made a dramatic transformation to online advertising.

Bloomberg News
May 13, 2015 at 2:32AM

NEW YORK – This isn't your parents' America Online.

The early Web pioneer once known for screeching dial-up modems and "You've got mail" has undergone a ­dramatic transformation over the past three decades to become a competitor in the growing online advertising business.

That transition helped attract interest from Verizon Communications Inc., the largest U.S. wireless carrier, which Tuesday agreed to buy AOL Inc. for about $4.4 billion. What Verizon wants is to make more money from mobile video.

AOL is now focused on online video and on so-called programmatic advertising, which uses computer algorithms rather than salespeople to buy and sell ad space on websites. The system works like an online marketplace: A shoemaker, for example, can get a display ad on a website in milliseconds, less than the amount of time it takes a reader to load a Web page. And data gathered on people's browsing habits helps the shoemaker reach the right consumer with the right ad at the right time.

The goal is to become an automated middleman between advertisers and publishers. Last month, New York-based AOL unveiled technology called ONE that helps marketers decide where to best spend their money, putting it in direct competition with two online ad giants, Google and Facebook. The technology allows advertisers to see whether consumers are buying more products after seeing an ad on a smartphone, and enables them to shift more spending to mobile devices from desktops and television.

AOL's reinvention has come largely through investments. The biggest was the $418 million purchase in 2013 of Adap.tv, which matches advertisers and video publishers through an exchange.

AOL Chief Executive Tim Armstrong has also been investing in the company's websites to broaden their global audience.

Armstrong also wants to grab a share of the advertising dollars that are being shifted from television to online video as more Americans watch TV on the Web.

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GERRY SMITH

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