CBS Interactive shows available on the CBS All Access app. The $ 6-a-month streaming service is now available on Roku _ the first streaming TV device for the network.(Photo: Uncredited, AP)

Consumers’ growing love affair with watching video on smartphones and tablets is at the heart of Verizon’s $ 4.4 billion acquisition of AOL.

That’s because AOL, even though it remains a top web destination, had developed cutting-edge online advertising technology that Verizon can use across mobile and broadband services.

AOL’s impressive technology makes it easier for ad agencies, publishers and brands to get the best ads in front of the most appropriate customers on videos across desktop, mobile, tablet and TV.

“This is really about AOL’s advertising platform,” says Roger Entner, an industry analyst at Recon Analytics. “It’s one of the few working video advertising platforms out there. Verizon bought it for a relatively cheap price.”

That is vital because consumers are migrating in droves to mobile video. More than 153 million in the U.S. will watch TV shows on digital devices at least once per month this year, according to eMarketer, accounting for 47.7% of the US population.

Advertisers want to be where the viewers are, so mobile ad spending is expected to amount to $ 28.7 billion this year, up 50% from $ 19.2 billion in 2014, eMarketer estimates.

Increasingly, those ads are being delivered via “programmatic buying,” or a computer-automated buy-sell process — such as the one AOL had developed. More than one-fourth (28%) of all digital video ads will be purchased programmatically this year, increasing to 40% next year.

A programmatic advertising platform such as AOL’s — and similar ones developed by competitors such as Yahoo — uses software to mostly automate the ad-buying process. It identifies the publishing sites that best match the advertiser’s wishes and demands, perhaps by demographics, consumer behavior or market location — and then buys and places the ads produced by the agency in a targeted manner

For now, AOL owned just 2.1% of the $ 50.7 billion U.S. digital ad market in 2014, down from 2.3% in 2013, eMarketer estimates. Total digital ad spending is expected to increase 15% to $ 58.6 billion this year.

With its AOL acquisition, Verizon can drive its portion of that upward, Entner said. “If you want to buy an ad in Verizon’s video service, you have to go through AOL’s platform,” he said. “By buying AOL’s platform, Verizon can keep all the profits that come from airing the ads.

Verizon will also use the ad technology for an in-the-works video streaming service that it plans to launch later this year, Entner said. Back in January 2014, the telecom giant acquired Intel’s online TV platform, which will likely serve as the underpinning for the streaming service.

As for AOL, a vital acquisition it made in August 2013 was Adap.tv, which had created a programmed video ad sales platform. “The combination of AOL and Adap.tv will create the leading video platform in the industry,” said AOL CEO Tim Armstrong at the time.

Together, the companies “are on a mission to make advertising as easy as e-commerce,” he said.

AOL’s technology makes it a two-time “digital trailblazer,” said Verizon CEO Lowell McAdam on Tuesday. “At Verizon, we’ve been strategically investing in emerging technology … that taps into the market shift to digital content and advertising. AOL’s advertising model aligns with this approach, and the advertising platform provides a key tool for us to develop future revenue streams.”

In acquiring AOL, Verizon gets a “mobile advertising platform that is truly unique,” said research firm MoffettNathanson in a note to investors Tuesday after Verizon’s announcement

“We can envision a scenario in which Verizon leverages AOL’s ad tech platform to target consumers and measure their engagement across traditional and digital video, and measure and deliver interaction across its multiple devices, platforms, and properties,” the analysts wrote. “That would allow for better ad serving, conversion, and ultimately attribution… and they can deliver all that across the largest wireless business in the U.S.”

Contributing: Roger Yu

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