VERIZON COMMUNICATIONS TO BUY AOL FOR $4.4 BILLION

Original Story: bloomberg.com

Verizon Communications Inc. agreed to buy AOL Inc. in a deal valued at $4.4 billion that intensifies the battle for advertising on mobile devices. A San Francisco M&A lawyer is following this story closely.

Verizon, the largest U.S. wireless provider, gets two of AOL’s technologies: exclusive video and its ability to automatically send targeted ads to mobile devices. The technology brings Verizon another step closer to the summer start of its mobile streaming service, featuring live TV, original shows and pay-per-view.

As the world embraces mobile with increasing enthusiasm, the deal gives Verizon new revenue streams at a time when its main business faces increasing competition from challengers such as T-Mobile US Inc. It also directly pits the company against two leading Web ad companies, Google Inc. and Facebook Inc.

“They want to integrate advertising and content programming with their wireless network,” Roger Entner, an analyst with Recon Analytics based in Dedham, Massachusetts, said of Verizon. “It’s an ambitious plan. The mobile advertising market is dramatically dominated by Google.” An Atlanta advertising and marketing lawyer assists clients with licensing terms, intellectual property rights allocation, and distribution agreements.

The carrier is getting its hands on AOL’s ad technology just before the debut of its mobile video-streaming service, which could come as early as next month. Verizon will pay $50 a share, a 17 percent premium over AOL’s stock price on Monday, and AOL Chief Executive Officer Tim Armstrong will continue to lead AOL’s operations after the deal is completed, the companies said Tuesday in a statement.

AOL’s shares jumped 19 percent to $50.52 at 4:22 p.m. in New York, slightly above Verizon’s offer price. Verizon dropped 0.4 percent to $49.62.

Different AOL

AOL today is a much different company now than it was 15 years ago, when the Internet portal famous for intoning “You’ve got mail” at log-in agreed to merge with Time Warner Inc. It was one of the world’s largest deals and became one of the largest failures. Two years later, the value of the combined company had dropped by two-thirds and the merger ended in a spinoff six years ago. The company, under Armstrong, has since bought sites like the Huffington Post and TechCrunch, and expanded its mobile content. A San Diego media lawyer assists clients with communications law cases involving digital communications, cellular communications, and broadcast regulations.

“The deal means we will be a division of Verizon and we will oversee AOL’s current assets plus additional assets from Verizon that are targeted at the mobile and video media space,” Armstrong said in a memo to employees. “The deal will add scale and it will add a mobile lens to everything we do inside of our content, video and ads strategy.”

Wireless Market

In a saturated U.S. wireless market, Verizon, with more than 100 million monthly wireless subscribers, is battling for customers with smaller and more nimble rivals like T-Mobile. One way to differentiate itself is its planned mobile video-streaming service, which will be one of the increasing number of packages targeting Americans who don’t want to pay for traditional pay-TV bundles. The carrier has been planning a service for as early as June, a person familiar with the talks has said.

Armstrong said the idea of some kind of combination was first broached last summer when Verizon CEO Lowell McAdam met with him at a CEO retreat.

The two executives talked about how they might be able to work together on mobile technology, according to a person familiar with the situation who asked not to be identified because the discussions were private.

AOL had been focusing on a technology known as programmatic advertising, an automated marketplace where ads are found and inserted in a flash. With a growing number of viewers watching videos on mobile devices, AOL had found a way to compete with Google and Facebook.

Advertising Component

Verizon had been working on a streaming-video system and had acquired video-technology companies including upLynk, EdgeCast and OnCue. It was clear, as those pieces came together, that an advertising component was missing, the person said.

McAdam assigned Marni Walden, the former chief operating officer of its wireless business, to lead the development of the mobile video service, which included getting some form of deal with AOL.

Over time, the discussions covered a variety of approaches. Different frameworks were considered, the person said. One was focused on assets, another on a joint venture and a third on acquisition, the person said.

Around January the talks centered on the idea of setting up a separate ad tech company as a joint venture. Eventually those discussions led to talk of a takeover, the person said.

New Revenue

Verizon’s push into mobile video will mark the largest attempt to tap new revenue sources beyond the calling and data services it sells to its wireless subscribers, Entner said.

“Verizon had the early lead in mobile advertising with the right vision and good assets behind it,” Entner said. “Then Google came in and bought AdMob and completely upended the market.
With this deal, Verizon is trying to turn back the clock and get control of the mobile value stream.”

Verizon said it plans to fund the deal with cash on hand and commercial paper. The transaction is expected to be completed by the end of the summer, the companies said.

Target Puts Mobile Coupons on Customer Cell Phones

USA Today

Using your cellphone during checkout at Target could soon earn you discounts.

Starting Wednesday, the giant retailer will allow customers to take advantage of special mobile-coupon offers on their handsets.

The coupon is redeemed when the bar code on the phone is scanned at checkout. Offers are good only once and expire on the dates listed. "We believe it's a competitive advantage for us," says Target.com President Steve Eastman.

Target (TGT) says it will be the first major nationwide retailer to exploit the bar-code technology in all its stores. It almost certainly won't be the last.

For example, J.C. Penney is testing similar scanner-based technology at 16 point-of-sale registers in Houston. But at the rest of its stores, checkout clerks still must manually enter alphanumeric codes tied to discount coupons, rather than using scanners.

Scanning bar codes makes the process faster and easier, says Dan Kihanya, vice president of consumer marketing at Cellfire, the mobile-coupon company working with J.C. Penney on its Houston tests. "Any time you have data entry, you have to worry about errors."

Mobile coupons, while not new, are still in their relative infancy. "It's an area ripe for growth," says ABI Research analyst Neil Strother. Not everyone clips coupons, virtually or otherwise. But most people crave a bargain when the economy is tough. And coupon technology works with more and more cellphones.

U.K.-based Juniper Research recently forecast that more than 1-in-10 mobile subscribers in developed regions around the world will use mobile coupons by 2014, generating nearly $6 billion in redemption value.

Kihanya of Cellfire says mobile coupons are redeemed at a 5% to 20% rate, compared with about 1% for print coupons. Cellfire does much of its business with grocery chains, such as Kroger and Safeway.

Shoppers interested in Target's program must "opt in" by registering at the company's online or mobile websites, or by texting the word "COUPONS" to 827438. Opting in addresses privacy concerns, Target says. Once registered, shoppers receive a text message on their phones with a link to a mobile Web page with various offers, which can all be accessed through a single bar code. Target says the program works with any phone that has a browser and data plan.

New coupons will be issued on a monthly basis as older ones expire, although the number and frequency may evolve as the program expands. The coupons cannot be used on Target.com.

Currently, coupons are not tailored to the interests of specific customers, although it is something Target is considering as part of its mobile SEO program. "If privacy becomes an issue, we'll make an adjustment," Eastman says.