AOL Has Figured Out How To Replace Its Dying Subscription Business With Advertising
At the ad:tech conference Wednesday in San Francisco, CEO Tim Armstrong announced the integration of the company's advertising technology products into one platform, which it is calling AOL ONE.
In doing so, the company will allow ad buyers to plan, purchase, and measure ads in various formats across desktop, television, and mobile devices - all using one piece of software owned by AOL.
In a press release, AOL says that the development of the platform is under way, and that customers will be able to start using it later this year.
"Our mission is to foster an open, global ecosystem that simplifies digital adverting, enabling customers to efficiently leverage the entire technology and data ecosystem," AOL platforms CEO Bob Lord said in a statement.
In doing so, AOL continues an impressive turnaround that has used advanced advertising technology to make up for the fact that its internet subscription business, on which the company hung its hat when it came to prominence in the '90s, has dwindled by nearly 20% since 2011.
Total revenues went up 5% during that time period, from $2.2 billion to $2.3 billion, in large part due to the company's investment in the sort of automated advertising technology it plans to consolidate under the AOL ONE umbrella.
While AOL is the owner of media properties like TechCrunch and the Huffington Post, most of its recent revenue gains have come from technology that allows customers to buy ads on other sites across the Web. In 2012, it introduced an analytics and automated buying platform called AdLearn, and the following year the company debuted Marketplace, which helps publishers sell ad space.
AOL ONE will allow customers to manage the operations they previously did on those two platforms, as well as on Adap.tv, the digital video ad platform AOL purchased for $405 million this past August.
"Lots of different kinds of companies are injecting themselves into this space, and in some ways they're creating what we call a tech tax, where there are lots of hands in the cookie jar from the advertiser all the way through to the publisher," Adap.tv president Toby Gabriner said in an interview with Business Insider. "We're combining all of these entities under one umbrella, with a vision toward crafting a single platform that will allow an agency to manage its entire media investment using one platform."
Together, AOL's ad tech platforms accounted for $615 million in revenues in 2013, a business nearly as big as those of independent adtech companies Millennial Media ($259 million), Rocket Fuel ($240 million), and Tremor Video ($132 million), combined.
In short, AOL seems to have set itself up to be a successful programmatic advertising company, one whose future hinges on the popular theory that more and more digital advertising will be bought and sold by computers rather than human sales associates.
This theory is shared by the major ad agency holding company Interpublic Group, whose media-buying unit Magna Global plans to spend 50% of its clients' money on automated deals by 2016, and has agreed to be the first agency to use the integrated AOL ONE platform.
"This move to automation is one of the most important changes occurring in our industry. Over the last five years, we've been moving really aggressively into that space," Gabriner said. "The announcement of AOL ONE is the culmination of the work we are doing, and we are still continuing to invest."