For many Americans, the name AOL conjures up images of compact discs in the mail and the greeting “You’ve Got Mail.” Verizon Communications Inc. sees a powerhouse in mobile video advertising.
Verizon, which reportedly has approached AOL Inc. about a potential acquisition or joint venture, is primarily interested in its programmatic ad technology, which allows marketers to buy and sell ads using an algorithm, rather than the phone calls, three- Martini lunches and hand shakes of yore.
Automated ad buying is an essential tool for companies such as Verizon as they increasingly offer content over mobile phones and the Internet. Digital marketers are demanding a streamlined buying and selling process – leaving those without a programmatic platform at risk of losing those ad dollars.
“If more content is being streamed online, they have to think of a new way to sell ads,” said Praveen Menon, an Internet analyst with Bloomberg Intelligence. Buying or hooking up with AOL makes sense “given that programmatic is an increasing portion of ads sold online.”
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In the next four years, global automated advertising will grow by more than 150 percent to $53 billion, according to research firm Magna Global, which also predicts spending on digital advertising will match spending on TV ads by 2019.
Automated ad buying and selling works much like financial trading. A media buyer seeking to reach a certain demographic is matched through a digital algorithm with a publisher selling that type of ad space. The buyer then places a bid, with the space going to the advertiser willing to pay the most. It’s all over within seconds.
Besides being more efficient, automated ad buying also tracks how Internet users interact with the ads, letting marketers know whether they led to a purchase.
Verizon could pair AOL’s programmatic ad technology with a future online-video product, sources told Bloomberg News.
Neither Verizon nor AOL would comment on the acquisition speculation.
Determined to remake AOL after its split from Time Warner, Chief Executive Officer Tim Armstrong pushed his company into automated ad buying. In 2013, he acquired Adap.tv Inc., which matches advertisers and video publishers through an exchange.
AOL’s focus on the technology has made it a logical acquisition target for content providers including Verizon looking to keep up with the rapidly moving digital world.
“The automation of advertising is probably the single largest trend I’ve seen since I started doing Internet stuff 20 years ago,” Armstrong said at a New York media conference in November. “It’s probably the fastest-growing trend I’ve seen.”