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Why Is AOL Still Relevant?

Thomas Rozycki  Follow

In the wake of last week's announcement reporting that Verizon was acquiring AOL for $4.4 billion in cash, a colleague asked me, "Is AOL still relevant?" The answer is a resounding yes, but not for the reasons one might think.

As a child of the '80's and a proud, card-carrying nerd, I remember the days when 2-3 times a week, without fail, I would receive a CD in the mailbox exhorting me to sign up for the community of America On-Line. And in those days, the [sweet melody of dial-up] was the soundtrack to my adolescence. Believe it or not, AOL *still* derives revenue from dial-up subscribers, somewhere north of $150 million per quarter.

With the rise of cable internet, this part of the business has become increasingly less and less relevant. Many of you may not even know it, but you are consuming AOL properties everyday: The Huffington Post, StyleList, mapquest, TechCrunch and engadget are all owned by AOL. And the infrastructure they have built behind these properties is very significant. So while you may not have heard the soothing sounds of a modem in recent years, yes, Virginia, AOL is still relevant.

AOL has built a robust content network that is driven by advertising across its media properties. It has also has pioneered a state-of-the-art mobile video delivery service. Verizon, one of the largest wireless providers in the U.S., needs to not only "own your phone" but the content experience on that phone. Equally as important (if not more), is the ad revenue that they can generate from you consuming that content. The more you watch, the more they make. Fairly simple.

So what Verizon bought the other day is direct access to you, the consumer. Your viewing patterns and increasing use of mobile video pushed Verizon to make an acquisition that will make them more relevant to you on your mobile device. Building it from the ground up would have taken too long and would probably have fallen short of what AOL has to offer today.

It will be very interesting to see what type of content deals Verizon will be able to strike on mobile. Certainly, they have an entrenched base of content on the MSO side of the house, but it remains to be seen how that will translate to mobile.

All in all, I believe this was a very shrewd move by an industry leader. However, this move also served as a clear indication that these media and technology powerhouses are very much interested in paying top dollar for our time and attention. End of Story

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