Back in 2007, AOL purchased the first of the real mobile display ad networks, Third Screen Media, for $110 million. The idea of that acquisition made the company look ahead of the curve to the outside world. AOL saw mobile as coming, and acted upon it. However, the valuation at the time made the company look like it overpaid, and internally the pursuit of the deal was met with great disagreement.
In reality, Third Screen Media was an early house of cards in mobile advertising, with more bluster than substance. In perfect AOL fashion, instead of augmenting the new acquisition and leading the mobile way, AOL virtually disintegrated the company in the 24 months that followed. So, quickly, where AOL looked as if it set itself up for the mobile evolution, eight years later it is still lagging considerably behind its competitors.
From an industry standpoint, the built-up image that Third Screen Media created, coupled with its early entry to the market, allowed it to be widely regarded as the top of the pyramid of this burgeoning mobile industry. With its acquisition, there was now a vacuum with two mobile ad networks fighting for that top spot: AdMob (now owned by Google) and Millennial Media.
Today, AOL announced its purchase of Millennial Media for $238 million, and this could be déjà vu all over again.
Starting in early 2009, as the smartphone ecosystem began to truly develop, Millennial Media positioned itself as one of the go-to’s for mobile display advertising. In a time of market confusion, the company smartly made itself a “safe” bet for agencies. Advertising clients had little knowledge of the behavior of mobile consumers or any experience advertising to them. Their agencies, which had little more expertise themselves, appeased their clients by putting their budgets with one of the de facto leaders in this area. The more the name “Millennial Media” showed up on media plans, the more clients trusted that line item, based more heavily on familiarity than actual results.
Millennial Media rapidly expanded their sales teams, and showed corresponding revenue growth—partially due to their efforts, largely due to the marketplaces. Their seeming success enabled them to file to go public in January of 2012, and debut in March of that year. They were the only pure-play mobile advertising network to come to the public marketplace, and the hype factor was in their corner.
During that interim period, an institutional investor sought out my counsel on making an investment. Over a 60-minute discussion, I explained to him why this was a stock to either short or stay away from, altogether. From our first-hand experience of testing campaigns with them, we saw this as the newest mobile charade, with many more challenges than they were outwardly presenting. He shockingly said that I was the only person to make anything that resembled that assertion.
Millennial went public at $13, and ended its first day of trading at $23.50. While it continued to augment its own offerings, the next three years saw the company acquire other entities in an attempt to grow, in a significantly heightened competitive landscape. It bought companies like JumpTap for $200million+, and Nexage for $108 million. However, the company did not reap any of its perceived rewards. Instead, it was mercifully purchased for $1.75 per share by AOL, with a total price of $238 million—less than the cost of the parts of just two of its acquisitions.
AOL is a different animal today than it was in 2007, and perhaps this go around will not just be Third Screen Media 2.0. But in the ongoing war to compete in mobile advertising with Facebook and Google, specifically, AOL needs to apply some true initiative and ingenuity. Better, they need to show some real mobile expertise, and not just replicate the actions of others. If not, we know how this story ends.
Jordan Greene is Principal/Mobile Media at Mella Media. Follow him on twitter @GreeneMarket