There are two reasons why AOL thinks it can compete with Google and Facebook on video
That was the claim made by Tim Armstrong, AOL chairman and CEO, speaking on his company's first quarter earnings call on Friday.
It's a bold statement, not least because AOL has a long way to go. EMarketer estimates it is currently in 11th place in terms of global digital ad share, with just 0.71% of the market to Facebook's 9.07% and Google's 31.07% (see table below.)
But, fresh from announcing a 7.2% lift in revenue, thanks to strong ad sales, Armstrong is determined the company will get there. And he gave two big reasons as to why he thinks it's possible.
Advertisers want a one-stop-shop for their digital advertising - and AOL has just built a new platform to help provide that
The idea was to create an open platform, where advertisers can plug in lots of different components of their spend - across AOL's platforms, rival digital competitors, and even TV - and view it all in one place.
Armstrong said on the call that this is the way marketers are moving. They want to consolidate the number of vendors they work with when it comes to their digital advertising. He said that "unsophisticated customers" have around "15 point solutions" whereas the more sophisticated customers are on a "migration path" to five or so systems.
"We're building toward being one of the top three in this area," Armstrong said (the number one and two being Google and Facebook.)
Where he thinks AOL can differentiate itself from Google and Facebook is that it is offering an "open" platform, where marketers can plug in their own components, even from rival firms. Armstrong used the metaphor of computer network servers: "You don't buy big box servers any more, where you have to throw the whole server out, you can replace the different parts. Ad tech systems work that way."
AOL doesn't just do the ad tech. It makes the content advertisers want too
Another way in which AOL (and others like Yahoo, too) stands out from Facebook and Google is that it produces its own original content.
AOL has the scale of The Huffington Post which it claims reaches 200 million monthly unique users, other popular news sites like TechCrunch and Engadget, plus video programming like "Park Bench" with Steve Buscemi and "Making A Scene" with James Franco. AOL claims its top shows reach 10 to 15 million viewers, which isn't bad considering its video offering is still new to the market.
Armstrong describes this as its "barbell" strategy: "Premium" content, plus ad tech, which is very different from the pure ad tech players it is fighting to take advertising share from. And it plans to invest around $25 million in video content over the coming year, according to CFO Karen Dykstra who was also speaking on the Q1 earnings call.
Video is a smart road to go down. Marketers can't get enough of it. It is the fastest growing advertising sector in the US, according to McKinsey&Company.
AOL knows it can't take on the scale of Facebook and YouTube in this area (at least not yet, anyway) but it hopes its two-pronged strategy can at least see it giving the rest of the digital advertising sector a run of it money. And judging by AOL's Q1 results on Friday, there are already some signs of a revenue payoff.