Content may be king, but as the recent spate of traditional print news outlets shows, it depends upon the type of content going forward and how to monetize it. In the case of AOL, which in large measure was responsible for the mass adoption of the Internet, the struggle has been to regain its relevance as a player with advertisers to support its content.
Having been eclipsed by the likes of Google, Facebook and Twitter, et al., AOL has decided to place its bets on video and making it easier for advertisers to reach and track their target audiences. It is thus a significant move by AOL CEO Tim Armstrong (who joined AOL in 2009 from Google), that the company has agreed to purchase start-up Adapt.tv for $405 million in cash and stock—$322 million in cash and approximately $83 million in AOL common stock, subject to certain adjustments. The deal is expected to close in the third quarter of this year.
This marks the largest acquisition by AOL since it became an independent company after its unsuccessful marriage to Time-Warner, besting the previous $315 million it paid in 2011 for the Huffington Post.
“AOL is a leader in online video, and the combination of AOL and Adap.tv will create the leading video platform in the industry,” AOL chairman and CEO Tim Armstrong said in announcing the deal. “The Adap.tv founders and team are on a mission to make advertising as easy as e-commerce and the two companies together will aggressively pursue that vision.”
Image via Shutterstock
Repositioning for the Video Age
For those not familiar, Adap.tv provides a “programmatic” platform that lets buyers and sellers use automated tools to plan, buy and measure activities on traditional TV and on online video. While a start-up, it has created more than a bit of industry buzz. The reason is that in 2012, Adap.tv helped execute more than 26,000 global ad campaigns on behalf of brands, agencies and publishers, which ran on about 9,500 websites. In short, it is providing the reach and analytics across multiple platforms that advertisers are looking for to improve the efficiency and effectiveness of their ad campaigns.
AOL is literally and figuratively banking on ease of use and deeper knowledge about transactional behavior as the lure that gets advertisers to find AOL content worthy of support. This is particularly true given its growing portfolio of video from Huffington Post, and its own original Internet shows. In fact, AOL is tripling its investment in original Internet video programming with 15 new ones on tap for release this year.
All of this comes at a time of retooling. AOL has been shedding under-performing assets in an attempt to shore up its balance sheet and put it in a position to be one of the hunters as disruption continues in the content business. AOL recently reported its second quarter financial results, and the good news for investors was that revenue increased 2 percent to $541.3 million, with a net income of $28.5 million. This was compared to $970.8 million for the same quarter in 2012; however, Q2 2012 included $1 billion from Microsoft, which bought 800 patents from AOL – meaning the company is directionally correct in terms of revenues and profits. This also means the company is creating conditions that will enable it to acquire the assets it needs to assure advertisers of its commitment to being a platform customers want to visit.
Obviously, video is going to be key, and grabbing Adapt.tv provides a bridge to the advertisers that could be the differentiated value needed to make them give AOL more than a glance when they are looking at their spends. Hopefully, it also means the glances of customers at AOL content can be converted into transactions.
Adap.tv will operate as part of AOL’s video organization, which is led by Ran Harnevo, senior vice president of video, and be part of AOL Networks comprehensive offerings for publisher and advertiser partners.
Can the company responsible for the signature “You’ve Got Mail!” – which gave it early Internet dominance – morph itself into a “You’ve Got Video!” place of preference? While problematic to say the least, the acquisition shows that there is a strategy at work here that is in line with who and where next generation value will be generated and monetized, and for that, Armstrong deserves credit for picking off a company that advertisers already appreciate in a sector that itself is undergoing dynamic transformation.
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