What: Shares of Millennial Media (UNKNOWN:MM.DL), a mobile advertising platform company, surged on Thursday after rumors that AOL, which was recently acquired by Verizon (NYSE:VZ), is interested in acquiring the company were reported by TechCrunch. The stock was up 41% at market open, settling a bit by 11:30 a.m. for a gain of 27%.

So what: Verizon's $4.4 billion acquisition of AOL was largely for AOL's digital advertising assets, although the company also operates a dial-up Internet service and owns a variety of popular websites, including TechCrunch. Verizon's push into online video, which will focus mainly on mobile devices, will require mobile ad technology to support monetizing the service.

Strategically, Millennial Media would be a good fit for AOL, and it would significantly increase AOL's presence in mobile display ads. The rumored buyout price is in the range of $300 million to $350 million, a significant premium over Millennial Media's $200 million market capitalization at Wednesday's close. TechCrunch reports that if the deal does go through, it is likely still weeks away.

Now what: While Millennial Media makes sense as an acquisition target, the company has been a disaster since going public in 2012. The shares have tanked, and in 2014, the company reported a $149 million operating loss on just $296 million of revenue. Competition from major players like Google, Facebook, and Twitter has made life difficult for the company.

Given Millennial Media's performance, an acquisition is likely the best way forward for investors, as the viability of Millennial Media as a stand-alone company is questionable given its massive, and growing, losses. If an acquisition does take place at the rumored price, AOL would be paying about one-times sales for the company, and Millennial Media's advertising technology could be folded into Verizon's mobile video ambitions. I suspect that Millennial Media would jump at any buyout offer, given the circumstances.