BETA
This is a BETA experience. You may opt-out by clicking here

More From Forbes

Edit Story

AOL Quietly Invests $500 Million In Programmatic TV Advertising

This article is more than 7 years old.

After pivoting from its "you've got mail" roots to focus on online programmatic advertising, AOL has been working to bring that technology to television, with pilot efforts in Australia and Canada to aggregate and sell ad blocks across multiple networks, targeting specific audiences. Today the company revealed more details as to the extent of its ambitions in television, and its spending—a half a billion dollars so far.

“We’re building and innovating on the TV side, trying to get to where the puck is going,” Tim Mahlman, the president of AOL Platforms says.

In the digital media sphere, more than two-thirds of advertisements are currently purchased programmatically, typically in real-time auctions, allowing marketers to target ads to the audience they’re seeking, and publishers to optimize their inventory. For consumers, it should mean advertisements that will be interesting and relevant.

AOL entered programmatic advertising six years ago and has become a strong competitor to the likes of Google, Facebook and AppNexus. This is in large part due to AOL's 2013 purchase of Adap.tv, a service that partners online video advertisers buyers and sellers.

“The programmatic advertising business has been growing exponentially, and AOL has a seat at the table,” Mahlman says.

AOL’s revenue from programmatic advertising has skyrocketed: from just 2% three years ago (about $43.8 million) to over 50% today. (Based on 2015 numbers, that would mean some $1.264 billion.) In fact, this software may be AOL’s most valuable attribute, as many believe it led to Verizon’s $4.4 billion acquisition of the company to be due to these resources.

“Targeted advertising and mobile and internet advertising is what has made Google the company it is, and companies like Verizon and AT&T want to achieve at least some of the success that Google has generated,” analyst Barry Shine of Drexel Hamilton says.

“Verizon says that since they’ve acquired AOL, revenue has been up within the company,” says Shine. AOL would not give specific revenue numbers since the acquisition.

AOL hopes to see similar growth in programmatic television using similar software that has adapted to linear TV. While not exactly like digital programmatic advertising—the ads are not sold in a real-time auction online—these ads are similar in that they are data-driven and automated.

Unlike traditional TV ads, which are targeted to specific shows based on ratings, these ads are targeted to specific demographics, including age and salary. The data can drill down to the individual level, meaning advertisers are much more aware of the audience they are marketing to, whether it is during a particular program or during a block on a network. Marketers are, in this model, concerned with who they are targeting, not how many people they are targeting.

Programmatic advertising has yet to become commonplace on television, with only 4% of television advertising budgets being spent programmatically using technology from companies like AOL, Turn, TubeMogul and Videology. But AOL is hoping to change this. And it’s clear why: At around $80 billion in the U.S. and $250 billion globally, the television advertising market is still bigger than that of digital.

“You can imagine why there is a massive opportunity for AOL as an ad technology company,” Mahlman said, explaining that by including television in its capabilities, AOL can become a one stop shop for programmatic advertising, encompassing the digital and television markets in a platform the company calls One by AOL. “For sellers to have a holistic vision of the inventory that they have to sell and for media buyers to have a holistic vision of all the inventory that they buy, TV was really a critical part to add to the ad technology.”

In order to accomplish this on the TV side, AOL must work with both the buyers and sellers. So while AOL’s customer is technically the media buyer, it must integrate its software and algorithms into the seller. While not all of the networks in which the technology is integrated have gone public about it, Univision and Canada’s Rogers Communications have announced that they use it.

“We are in discussions with every network, and our goal would be to have the entire TV ecosystem in the platform,” Dan Ackerman, AOL’s head of programmatic TV says.

On the buy side ,Omnicom Group, which spends billions on TV each year, is AOL’s biggest get, with clients including Old Navy and Google.

“This provides our clients the opportunity to begin to realize the benefits of advanced targeting in linear TV,” John Swift, Omnicom’s CEO of North America investment, said in a statement when the partnership with AOL was announced.

Still, programmatic advertising is more present on digital platforms than on television, and the reason is simple: Television has had a system in place for years, and it has worked quite well.

“A media buyer could spend seven, eight or nine figures with a handful of media owners pretty efficiently, via phone calls, spreadsheets and email,” Ackerman says.

Until now. Due to the fragmentation of television with the creation of streaming, over-the-top content and more, it is harder to keep track of ad dollars and how effectively they are being spent. This is why the company is predicting that programmatic advertising will become a mid double digit percentage of the total TV market--perhaps 15%--in the next five or six years.

“The TV industry came around to the realization that we need to adopt some of the benefits of digital and the data driven application to raise the level of accountability and attribution,” Ackerman says, explaining that this ad tech provides more data than just ratings for a particular age group, instead allows advertisers to target viewers the same way that digital content can.

“Competitors are no longer just the other TV networks. It’s AOL, Google Facebook—everyone selling video, and the networks must continue to demonstrate value of medium they are selling,” Ackerman says.

Programmatic advertising isn’t the only way networks are hoping to compete with digital, as the most recent Upfronts made clear. Turner has Ignite, which helps advertisers create branded content or better target audience, and Viacom has Vantage, which allows advertisers to more specifically chose programs across Viacom networks.

AOL, though, hopes to thrive on the fact that its ad tech software can be used at once on digital and television, across multiple networks.

“If a marketer is going to use programmatic, data driven and automation, we’re providing them a technology platform that allows them to do that holistically across everything, so the value of having TV helps get more advertisers and deliver better value,” Ackerman says, explaining how TV helps the entire ad tech platform.

Still, Mahlman and Ackerman admits that programmatic advertising will never take the place of the entire TV ad business.

“There is so much in television that is contextually based--the Olympics, the Super Bowl, the Grammys, the Oscars--that are the right environment for a brand or sponsorship,” Ackerman said, explaining how these often require a human touch.

Still, looks like the Mad Men may soon have more robotic competition.

Send me a secure tip