Armstrong emphasized that programmatic and “premium” prices and placements should not be viewed as mutually exclusive.
“Programmatic, amid all the industry lingo, sometimes gets confused with low value network [placements],” Armstrong said. “It allows you to take the manual processes around targeting and inventory planning that were constrained by headcount, by making those activities machine-to-machine. That process is no longer constrained by headcount; it’s now only constrained by how well machines can trade inventory in real-time.”
Marketers are not using programmatic tools for placing low-cost, low-margin advertising, Armstrong said, insisting that at least from Aol’s vantage point, they’re doing “high-scale, high-volume, high-value” inventory capture: “I was just out in the Midwest meeting with major companies in Detroit and Chicago after our NewFronts presentation, and all of those companies are moving to programmatic. There has been a ‘cash for gold mentality’ that’s often propagated, but that’s not true here.”
At the moment, though, Armstrong pointed to a wide variance in how much of a marketer’s budget is moving through programmatic channels. Some companies are putting only 2% of their budgets in programmatic, while others are going as high as 30%. He expected that ad budgets would devote as much as 50% of their online ad spend to programmatic over the next few years.
Given that view, Armstrong also discussed Aol’s belief in traditional, direct sales methods as part of its “barbell strategy,” which reflects self-identifying as a media company with supporting marketing services on one end and a technology provider of programmatic tools on the other.
Data and analytics would be the connective tissue between those two sides, Armstrong said. He then referred generally to a range of ad tech providers working somewhere in the middle of those two poles, saying there will eventually be no place for such companies to grow.
“As a major name in the advertising business, your number one weapon in the advertising business is brand equity,” Armstrong said. As large advertisers think about the commoditization of targeting over time, Armstrong said there’s almost an anti-Moore’s Law at work here, referring to the belief that computers naturally increase their capabilities and processing speed exponentially. The differentiation among companies in that space will depend on matching targeting capabilities through DSPs with the human element associated with marketing services, Armstrong said.
That’s the reasoning behind “big investments” in video content, ad sales and Project Devil. Armstrong and Dykstra both provided much more detail about Devil’s results this quarter compared to previous ones, which suggests that those investments are finally paying off. The interesting thing is that Devil isn’t just for Aol’s owned-and-operated properties, which were given a lavish showcase at last week’s NewFronts event. The unit also runs on 250 other publishers’ sites as well.
In Q1, revenues for Aol sites were up a respectable 8%. But that was only part of the story, Armstrong said. Impressions for Devil units, which go beyond the O&O sites, were up 30% over last year, while deal values grew 60% and eCPMs rose over 20%. “Advertisers and publishers want the ability to put a lot of content in front of consumers, and that’s what Devil does,” Armstrong said. “It’s a content management system for ads, and we have done a really good job this quarter of scaling the Devil network.”
Regarding how Aol balances “reserved and non-reserved” ad placements, the company is seeing page view growth that is inspiring more advertising on its sites and, in turn, higher prices.
Still, as Wells Fargo’s Peter Stabler noted, how online ads are valued remains a problem for the industry in general. It’s a particular problem for Aol, which needs to prove that its advertising meets marketers’ basic definitions for “premium” spending. So, Stabler wondered, is viewability the answer? And if so, what is Aol doing about it?
“Up to this point, the internet has used ad-server calls and technology-driven ways of understanding how ads are delivered and priced,” Armstrong said. He pointed to work on viewability which Aol has done with the Interactive Advertising Bureau and with display analytics company MOAT. “We believe that metrics around ‘flight to quality’ and viewability are a fait accompli. Over time, how impressions are served will migrate to viewability. We believe, on a per-impression basis, the internet is too cheap when you consider the value that we deliver and you compare it to other media types. Our core thesis is that viewability and quality will be in greater demand and that ultimately, advertisers will pay more in recognition of that value.”