AOL Not A 'Big Deal' For Verizon Like DIRECTV, But Still A Very Important One

Tuesday could turn out to be a great day for Verizon Communications Inc. (NYSE: VZ). After announcing its $4.4 billion acquisition of AOL, Inc. (NYSE: AOL) in the morning, the Wall Street Journal reported that U.S. regulator are unlikely to block its acquisition of DIRECTV (NASDAQ: DTV).

Craig Moffett, Moffett-Nathanson analyst, was on CNBC to discuss why the DIRECTV deal matters more for Verizon than AOL deal and what value will AOL be providing the company.

Offering Something That Nobody Else Can

“Just AOL with Verizon is going to be something like 1 percent of the enterprise value of Verizon,” Moffett said. “So it’s a small transaction. It’s not like the DIRECTV deal, which is a big deal. But they're trying to put together a package of advertising assets and mobile assets for advertisers that I think are really differentiated.”

“So, if you're trying to reach millennials and you want to reach them on a mobile platform, Verizon will be able to offer advertisers something that other people won’t.”

Verizon: An AdTech Company

On whether Verizon really needs AOL to offer advertisers something that others can’t, Moffett said, “Remember what AOL is, AOL is not a dial up company anymore, it’s not a media company anymore. It’s really an ad-tech company now and so what Verizon is getting out of this is ad-tech.”

“And if you're thinking about how do I actually monetize my wireless platform, the answer is probably not just driving usage from subscribers because they have been doing that for a long time and it hasn’t generated any extra revenue, it’s probably finding a way to monetize through advertising."