The Armstrong effect: Why agencies are upbeat on AOL tech, video

AOL has come a long way from hawking CDs and Internet subscriptions. For the past five years, under Tim Armstrong, AOL has fashioned itself as a media and ad tech company, a strategy that it needs to succeed if it wants to offset the declining Internet subscription business it is still known for.

But despite the inevitable pitfalls with such a pivot, multiple agency executives say that AOL’s new tack is working. “As we’ve seen with companies such as Yahoo, big Internet company turnarounds are always difficult and often contentious,” said Media Kitchen chief digital media officer Josh Engoff. “Armstrong has smartly focused on areas of unquestionable significance to the company’s current and future value.”

One of those areas is video, which has become a major focus for AOL. Its slate of original video has attracted well-known names from film and television world, including Steve Buscemi, Nicole Richie and James Franco. Those big names, along with the quality of AOL’s output, have helped it become a more compelling partner for brands looking to shift more of their video spend from television to digital, according to Essence digital director of investment and partnerships Danielle Sporkin. “What they’re doing makes a lot of sense. It fits well with how agencies and the industry is moving,” she said.

The other half of the equation is where AOL has won over agencies with its programmatic platform, which AOL has built up by shelling out $638 million since 2013 on ad tech companies such as, Gravity, Convertro and Vidible. This “open” programmatic approach has been good news for its third-party ad group, which pulled in $215 million in the third quarter of last year.

John Nitti, chief investment officer at Zenith, said he’s enthusiastic about AOL’s open approach to selling programmatic. With it, he said, AOL is positioning itself for the opportunity to take share from Google and other platforms. “They’re not disincentivizing you to make you use their own products,” he said. “The open-source approach will be friendlier to clients.”

Still, it’s a work in progress for AOL, which agencies say still struggles to sell the promise of its programmatic platform to those not familiar with it. “AOL is working to cure this, but there is more high-touch education still left to do. This happens to be a huge opportunity, because they do in fact have some great assets,” said 360i president Jared Belsky.

Some agencies also have doubts about whether AOL can be a true open programmatic platform when its own brands and content plugs into it. “Will they start prioritizing their own publishers and content in a way that both increases costs and decreases transparency for buyers and advertisers? This remains an open question,” said Engroff.

Internally, AOL is also dealing with the fallout from these shifts to programmatic, which is forcing the company to both restructure its sales operations around its platform ambitions and shutter some of its less successful content brands.

Despite those apprehensions, agency executives are on the whole keen on AOL, and in particular Tim Armstrong, whom they say appreciates the agency and client perspective on the evolving trends in video and programmatic. It’s a very different take than the one they have on Yahoo CEO Marrisa Mayer, whom they say has been more focused on creating new products than on fostering relationships with agencies.

“With his sales background, the feeling is that Armstrong ‘gets us,’” said OMD chief digital officer Ben Winkler. “His nearly maniacal focus on content over the past few years has made AOL a clearer and more compelling player than some of its competitors.”

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