AOL’s ‘ONE by AOL’ To Boost Its Programmatic Ad Platform

by Trefis Team
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America Online (NASDAQ:AOL) is in the middle of transforming its business focus from content to ad technology. According to CEO Tim Armstrong, the company has adopted a barbell sales strategy that offers programmatic advertising on one end and deep marketing services or premium buys on the other. The company has intensified its efforts to capture a bigger chunk of the programmatic ads industry by consolidating its programmatic platform under a unified offering called ONE, which is an open, unified programmatic platform enabling marketers to optimize against campaign goals across all screens, formats and inventory types. [1] In this note, we will look at AOL’s offering and how the programmatic platform can boost the company’s revenues.

See our complete analysis for AOL here

What Is ONE By AOL?

In the last few years, online advertising technology has undergone a rapid transition, largely due to technological and cultural shifts. There have been innovations in how ad slots are bought and a proliferation of new contexts in which ads are viewed, including smartphones, tablets, online videos and social networking sites. This profusion has resulted in chaos in online advertising, which has created complexities for brand managers, agencies and publishers who are required to sort through the sprawl of available choices.

AOL plans to address these complexities by consolidating its programmatic platform under its ONE offering. According to AOL, ONE will provide a single, unified, enterprise-level platform for driving powerful brand insight and marketing execution  across all screens, formats and inventory types. ONE boasts of an open ecosystem where partners and competitors, publishers and marketers, are all beneficiaries of a more seamless and efficiency-focused technology landscape. Point solution brands that have been in market will consolidate and rebrand under ONE by AOL, includes:

· ONE by AOL: Video (formerly Adap.tv)

· ONE by AOL: Video Marketplace (formerly Adap.tv Marketplace)

· ONE by AOL: Display (formerly AdLearn Open Platform)

· ONE by AOL: TV (formerly Adap.tv)

· ONE by AOL: Audience (formerly AOL’s data management platform)

· ONE by AOL: Attribution (formerly Convertro)

Programmatic Platform To Boost Revenues

We believe that a programmatic platform would be a key driver to AOL’s future revenue growth. AOL’s programmatic platform can be instrumental in increasing revenue per 1,000 impressions (RPM) by efficiently matching ads with relevant ad content. The capabilities of AOL’s programmatic platform have been further augmented by the acquisition of Adapt.tv in 2013. Furthermore, with the launch of Marketplace in 2013, AOL has access to the complete stack of advertising technology that can offer a full-service solution to premium advertisers and publishers alike.  The company’s platform has a visitor reach of 51% and has been consistently ranked among the leaders. [2]

According to eMarketer, advertisers spent $10 billion on programmatic platforms in 2014 in the U.S. It projects that this spending will increase to $14.88 billion in 2015. eMarketer also expects that programmatic buying will swell to $20.41 billion in the U.S. by 2016. [3]

We think AOL is well-positioned to capture a bigger chunk of programmatic spending in the future by leveraging its programmatic platform for both video and static display ads. While AOL doesn’t disclose the breakup of its revenues from its RTB platform, if AOL were to capture 10% of this spending in the U.S., its display ads revenue from third-party could double by 2016.

Our price estimate for AOL is $42.41, which is 5% above its current market price.

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AOL Formally Launches One To Boost Its Programmtic Platform

America Online (NASDAQ:AOL) is in the middle of transforming its business focus from content to ad technology. According to CEO Tim Armstrong, the company has adopted a barbell sales strategy that offers programmatic advertising on one end and deep marketing services or premium buys on the other. According to the recent announcement, the company has intensified its efforts to capture a bigger chunk of the programmatic ads industry by consolidating its programmatic platform under a unified offering called ONE, which is an open, unified programmatic platform enabling marketers to optimize against campaign goals across all screens, formats and inventory types. [1] In this note we will look at AOL’s offering and how the programmatic platform can boost the company’s revenues.

See our complete analysis for AOL here

What Is ONE By AOL?

In the last few years, online ads technology has undergone a rapid transition, largely due to technological and cultural shifts.  There have been innovations in how ad slots are bought and a proliferation of new contexts in which ads are viewed, including smartphones, tablets, online videos and social networking sites. With this profusion has arisen a degree of chaos in online advertising, which has created complexities for brand managers, agencies and publishers who are required to sort through the sprawl of available choices.

AOL plans to address these complexities by consolidating its programmatic platform under its ONE offering. According to AOL, ONE will provide a single, unified, enterprise-level platform for driving powerful brand insight and marketing executions across all screens, formats and inventory types. ONE boasts of an open ecosystem where partners and competitors, publishers and marketers, are all beneficiaries of a more seamless and efficiency-focused technology landscape. Point solution brands that have been in market will consolidate and rebrand under ONE by AOL, includes:

· ONE by AOL: Video (formerly Adap.tv)

· ONE by AOL: Video Marketplace (formerly Adap.tv Marketplace)

· ONE by AOL: Display (formerly AdLearn Open Platform)

· ONE by AOL: TV (formerly Adap.tv)

· ONE by AOL: Audience (formerly AOL’s data management platform)

· ONE by AOL: Attribution (formerly Convertro)

Programmatic Platform To Boost Revenues

We believe that a programmatic platform would be a key driver to AOL’s future revenue growth. AOL’s programmatic platform can be instrumental in increasing revenue per 1,000 impressions (RPM) by efficiently matching ads with relevant ad content.  The capabilities of AOL’s programmatic platform have been further augmented by the acquisition of Adapt.tv in 2013. Furthermore, with the launch of Marketplace in 2013, AOL has access to the complete stack of advertising technology that can offer a full-service solution to premium advertisers and publishers alike.  The company’s platform has a visitor reach of 51% and has been consistently ranked among the leaders. [2] According to eMarketer, advertisers spent $10 billion on programmatic platforms in 2014 in the U.S. It projects that this spending will increase to $14.88 billion in 2015. eMarketer also expects that programmatic buying will swell to $20.41 billion in the U.S. by 2016. [3] We think AOL is well-positioned to capture a bigger chunk of programmatic spending in the future by leveraging its programmatic platform for both video and static display ads. While AOL doesn’t disclose the breakup of its revenues from its RTB platform, if AOL were to capture 10% of this spending in the U.S., its display ads revenue from third-party could double by 2016.

Our price estimate for AOL is $41.51, which is in line with its current market price.

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Notes:
  1. AOL Launches ONE by AOL, April 14 2015, www.aol.com [] []
  2. comScore Releases December 2014 U.S. Desktop Online Video Rankings, January 27 2015, www.emarketer.com [] []
  3. US Programmatic Ad Spend Tops $10 Billion This Year, to Double by 2016, October 16 2014, www.emarketer.com [] []
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