Home Ad Exchange News AOL Q4: Programmatic Growth Led To Sales Restructuring

AOL Q4: Programmatic Growth Led To Sales Restructuring

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AOL q4 earningsAOL’s programmatic revenue grew 250% in the fourth quarter, and now accounts for 39% of AOL’s non-search revenue. In Q4 the company “integrated the first set of private marketplaces,” Armstrong said, for a total of 15 private marketplaces.

AOL’s shift to programmatic led to a recent restructuring of its sales force, another area of heightened attention from investors. AOL recently laid off 150 employees, primarily salespeople, in what it called a “realignment.” Mid-size accounts will now have smaller teams and fewer products available to them. AOL CEO Tim Armstrong said that reflected the advertisers’ actual use of the platform.

As part of that restructuring, AOL is creating an enterprise sales team that will focus on “connecting [AOL’s] pipes with customers deeply in the programmatic space,” Armstrong told investors. That group’s remit seems likely to include sales to agency trading desks and others in the ad tech ecosystem.

While Armstrong stressed the efficiencies of automation, AOL’s expected margin of 10% on programmatic business prompted concerns about how that might affect long-term earnings growth, since AOL’s premium inventory and subscription business create relatively higher margins.

The Video Play

The bulk of AOL’s content investment will be in video. The company plans to double down on HuffPost Live, which has posted over 1 billion video views since its inception. It launched AOL Rise this quarter, a mobile-optimized morning news show.

“We have a goal of creating a video network of the highest quality and scale underpinned by programmatic distribution,” Armstrong said. It will focus on video in the technology and women’s verticals.

AOL’s expansion into video content comes with investment in video on the technology side, as seen through AOL’s acquisitions of Adap.tv, Vidible, PrecisionDemand and Convertro. “There are few companies with global platforms that can go from OTT [over-the-top] to multitouch attribution, and we’re aggressively transitioning that into a single platform,” Armstrong said.

Armstrong expects AOL to see additional payoff from this strategy because of its decision to have an open platform with a “bring your own data” policy. “As the marketplace gets more competitive, people start getting into each other’s business,” he said. “The ability to let people have and own their own data is a differentiator.”

In Q4, AOL Platforms – which includes acquisitions like Adap.tv – became profitable, passing $1 billion in revenue. The platforms business grew 20% year over year, with AOL attributing $330.6 million in revenue to that business.

In the fourth quarter, third-party revenues grew 16% to $260 million. Meanwhile, its own properties declined 6%, with the sale of Patch unmitigated by growth from its other owned-and-operated properties.

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With the strongest revenue growth continuing to come from outside properties, it’s no wonder Armstrong wants to sell off underperforming sites while focusing on creating a few large omnichannel behemoths with a global presence (think Huffington Post).

Since Q4, AOL added another property to its shuttered list: gaming site Joystiq, which will fold into gadget review site Engadget.

Overall, revenue grew 8% in the fourth quarter. The stock missed sales estimates, but did beat the Street’s expectations of earnings per share due to better profitability. But that wasn’t enough: The stock was down 10% Wednesday morning.

Read the full earnings release here.

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