Reports have circulated that AOL is working on a deal to acquire mobile ad network Millennial Media for an estimated $300 million to $350 million.
Talk of the potential buyout, which was first announced by TechCrunch, has given Millennial Media’s stock a boost. Shares soared 28% after the report, and was trading at $1.90 per share earlier this week, giving Baltimore-based Millennial Media a market capitalization of $266.1 million.
Both Millennial Media and AOL, which was recently acquired by Verizon Communications for $4.4 billion, are keeping mum on the potential deal.
It’s unsurprising that AOL and Verizon would want to break into mobile advertising. As smartphone and tablet use has skyrocketed, so too has mobile video consumption.
Last year, VentureBeat reported that U.S. advertising firms and marketers would spend about $1.5 billion on mobile video ads by the end of 2014, more than double the $722 million spent in 2013. David Hallerman, EMarketer principal analyst, told VentureBeat that mobile video ads accounted for nearly 19% of all digital video ad spending in 2013. He predicted that figure would climb to nearly 26% by the end of 2014 and quadruple to more than $6 billion by 2018 for “huge growth.”
Ooyala, a Santa Clara, Calif.-based video publishing and analytics company, released a report indicating that smartphone and tablet video views more than doubled between the third quarter of 2013 and the third quarter of 2014. Smartphone and tablet video views made up just 6% of all online video views in Q3 of 2012. Since then, growth has exceeded 400%, according to Ooyala.
Millennials in particular are increasingly turning to mobile.
An August 2014 EMarketer report entitled “Tablet and Smartphone Video Viewing: Multiple Screens, Young Users Drive Growth” cited research by Deloitte, which found that training millennials (ages 14 to 24) had the highest combined share of smartphone and tablet video time at 16%. They were also the only group with a majority of time spent viewing on screens other than TV, which in Deloitte’s survey included desktop/laptop systems, smartphones, gaming devices and tablets.
In 2009, Google acquired AdMob for $750 million. And in 2010, Apple snapped up Quattro Wireless for $275 million. But Millennial, until now, has remained independent. It raised $130 million in 2012 when it went public, but has since lost nearly 90% of its valuation, according to The Wall Street Journal.
