TIM ARMSTRONG: We're doing platform acquisitions. When we bought TechCrunch, which I think people would call a content acquisition, it had CrunchBase underneath it, which is a platform. When we bought The Huffington Post, that was content but it had a blogging platform underneath it.
We will do acquisitions – content or ads – that have platforms attached to them.
Many media agencies still think of AOL as a collection of media brands. How do you change that perception to get the media buyer to think of you as a serious platform option?
Warren Buffett has a saying: "You can’t have hamburgers on the sign outside and French food inside." This is a classic case of the product (having) to match the sign we put out front. The better the products get and the more we're clear about the fact that AOL is more of a media platform company, that will happen over time.
You're hiring in enterprise sales to drive adoption of ONE by AOL. How many people are you planning to hire there, and what will that group look like?
We have a substantial and excellent media sales team. Over time we'll be building up an enterprise team that will mainly focus on a SaaS model for advertising. It's new, there's a handful of folks working on it, led by (Adap.tv CEO) Toby Gabriner. We have multiple deals with people using ONE by AOL as an enterprise platform.
Is ONE integrated yet in a unified software platform, or is it a collection of point solutions?
We've integrated on the display side the separate device streams from mobile, desktop and over-the-top. Video is integrated between mobile, desktop and over-the-top as well.
In display we have an integrated stack. Video has an integrated stack. What we're doing is building together the combination of a display and video stack together for ONE.
What other pieces of the stack do you still need to buy or build?
With the Convertro acquisition we have a fairly complete stack at this point. We're going to organically build pieces ourselves but would look opportunistically at other things. Right now we feel Convertro is a big piece at the end of the stack, which is about attribution and measurement.
You mention "opportunistically." Does it feel like there are a lot of bargains out there with advertising and marketing tech?
If you look across the ad tech spaces, these spaces move in waves. A few years ago, the data companies were among the most valuable things. Then it went to DMPs (data-management platforms). The main thing that is going to happen is the consolidation of the point solutions into end-to-end solutions. There will still probably be point solutions but they'll have to be very strong individually. Customers want more unified capabilities.
You said on your Q1 2014 earnings call 30% of digital advertising is programmatic and 70% is content deals, but that would flip in a couple of years.
I probably should've been more precise on that sentence. What I was saying is the minority of ads are programmatic today and that will move to the majority over the next five years.
Later you said the opportunity around mechanization is tens or hundreds of billions of dollars in the coming years. Can you be more specific about the size of the opportunity in digital ad automation?
I think it's substantial. Advertising globally is a $700 billion to $1 trillion industry every year. You have significant players in this industry like IPG Mediabrands, our partner. They're saying 50% of their spending is going to be programmatic by the end of next year. That's one player inside a really large ecosystem.
Much less than 10% of the industry right now is on programmatic stacks. The reason I say it's potentially billions and billions of dollars in opportunity is that I don't think customers are going to move backwards from using machines to help them plan, buy and serve advertising. A fraction of a very big industry is using programmatic and it seems likely a lot of the industry will use it.
Is Adap.tv the most robust direct deal automation piece that you have right now?
Adap.tv is the most singular platform we have, but AOL Platforms and Marketplace are both programmatic platforms and growing quickly.
In 2010 we were not in programmatic, not in video programmatic, not in syndication. Today we've built a business that we said would do $1 billion of revenue this year. It's a substantial shift in the marketplace and we're at the forefront.