Why Arianna Huffington May Actually Like Working for the Phone Company

NEW YORK ( TheStreet) -- If Verizon (VZ) and AOL's (AOL) Huffington Post seem like an odd couple, think again.

Sure, the liberal-leaning, politically-focused HuffPo would seem like a cultural misfit inside the button-down, broadband-services empire that is Verizon, the country's largest wireless provider.

And then there's that little matter of the Federal Communication Commission's  net neutrality rules, regulations passed in February to oversee the Internet that the Huffington Post enthusiastically supported and Verizon vociferously opposed.

But bringing the Huffington Post and the always opinionated Arianna Huffington to Verizon is all about the advantages of owning content, amassing new user data and then allowing AOL's automated advertising platform to sell space around that content. For Verizon, that means using HuffPo, and AOL's other web sites,  to learn more about the online preferences of its more than  120 million subscribers nationwide.

"The whole idea for Verizon was to get content and the advertising technology that AOL has," said Porter Bibb, managing partner of Mediatech Capital Partners, a New York-based boutique investment firm specializing in media. "It gives them the real global reach that they never had with AOL."

Questions about HuffPo's future were raised almost immediately after Verizon announced plans last month to acquire New York-based AOL for $4.4 billion. Observers were quick to note that the telecom provider and the news and entertainment website have often taken opposite sides in the high-profile debate over freedom of information flows online.

Yet Verizon chief financial officer Fran Shammo reaffirmed this week that it has no plans to spin-off HuffPo as part of its agreement to purchase AOL. In explaining the acquisition to investors, Verizon said it  plans to expand advertising revenue and strike partnerships to make more original video content available through its pay-TV and mobile offerings. 

Indeed, in the  May press release announcing the AOL deal, Verizon called the AOL's advertising model "a key tool for us to develop future revenue streams." In particular, AOL owns Adap.tv, a company that specializes in what marketers call "programmatic" ad sales or using software to buy and sell video spots in multiple mediums in real time.

The Huffington Post is now the second most-read digital native media brand in the world, according to analysis by Reuters Institute, increasing its share of users by a third and rapidly gaining on the industry leader in that category, Yahoo News. The news site has shown global ambitions, operating in 14 countries and partnering with traditional news outlets including Le Monde in France, L'Espresso group in Italy, and El Pais in Spain. Editions of HuffPo are published in French, German, Spanish, Italian, Portuguese, and Japanese.

From Verizon's side, Shammo has indicated the company is planning to use ad revenue and hoping to acquire or license original content for a new online video service currently in development. That's a clear contrast to rivals at Dish Network (DISH) Sling TV and Sony's (SNE) PlayStation Vue, which charge subscription fees.

According to market research analyst eMarketer, spending on programmatic digital video ads will mushroom 212.2% to $2.18 billion, 28.0% of total digital video ad spending. Their research projects that nearly 40% of global advertising revenue will be spent on digital or mobile ads in 2015.

Producing in-house content could help a phone and Internet provider like Verizon add value and keep customers, said Roger Kay, founder and president of Endpoint Technologies Associates.

"The way they avoid being turned into dumb pipes is by having exclusive content," said Kay, who is a technology marketing analyst. "Verizon is in this position of being marginalized because it doesn't have a complete suite."

In other words, Verizon has to keep up with rivals such as Philadelphia-based Comcast (CMCSA), which owns lots of content through NBC/Universal, and also acquired the automated advertising platform FreeWheel Media a year ago.

So, if that means having to look the other way when HuffPo goes on a rant about pay-television or Internet user fees, so be it. The phone company wants Arianna Huffington to feel at home.

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