AOL Unveils Plan to Mechanize Ad Purchases

Maybe you haven't thought about AOL in a decade or so, but Tim Armstrong has thought about little else.

Today the company's CEO unveiled the culmination of the company's four-year string of acquisitions of advertising technology companies -- a new cross-channel platform called One that he vows will do for ad sales what containerized cargo did for shipping.

The company not only unveiled a "mechanized" platform, but rebranded AOL Networks to AOL Platform just to ensure that the 600-plus marketers in the audience at ad:tech San Francisco got the point. The formal launch of One will follow later this year.

For our 20-something readers, AOL got  big -- really, really big -- when you and the World Wide Web just still toddlers. As use of the Web soared in the late '90s, as many as 30 million people relied on America Online to get onto the Internet.

'You've Got Mail!'

AOL came pre-installed on almost all new computers and updated software showed up regularly  in tens of millions of mailboxes; that's right: snail-mail to deliver freeware. AOL chatrooms were the social networks of the day, and AOL news pages drew millions of readers before Google existed. When email was still a novelty, each new message was announced in a human voice,"You've got mail!"

The company got so big that Time-Warner merged with it in 2000, a star-crossed $164 billion marriage that came to symbolize the bursting of the dot-com bubble. A divorce followed about three years later.

After AOL essentially  floundered for years, Armstrong left Google to lead AOL as CEO in 2010, initiating a string of acquisitions that culminated in today's announcement: Gravity,, MarketPlace, ADR, AOP, Pictela and others.

"I do feel today is a tipping point in our industry," said Armstrong, a man known for both his confidence and lofty visions. As Armstrong strutted back and forth on the massive ad:tech stage, he launched into a long history of  the shipping industry.

In 1954, he noted, it took six days to load a cargo ship, 10 days to cross Atlantic from the US to Germany, and four days to off-load the ship. Half the cost of products stemmed from loading and unloading ships.

Trucking company owner Malcom MacLean changed all that when he began loading cargo boxes from truck beds to freighters. The cost of shipping a typical product shrank from $5.83 to just 16 cents today, according to Armstrong who promised to bring the same sort of efficiency to cross-channel ad transactions. "We believe there's an opportunity to put containerization scale under the Internet," he said.

The Omnichannel World

Isn't this called programmatic advertising? Afterall, companies like already automate the purchase of TV ads and there are ad networks busily filling orders on mobile and Web channels. What's different here?  Armstrong repeatedly used the word "mechanization," but the more important terms might be analytics and cross-channel. One eliminates the need for anyone to make decisions on channels as users bounce from mobile, to TV, to video, to social, to Web.

As Bob Lord, CEO of AOL Networks, er, AOL Platform, said on stage, even if programmatic ads reach their peak efficiencies, "the chaos will still exist." He said that out of each dollar in advertising spending today, 55 cents go to the process of buying and manually loading the ads. Only 45 cents goes to the publisher. That translates to $74 billion a year in lost efficiencies, Lord said.

Lord and Armstrong also introduced a beta customer of the new platform: Matt Seiler, CEO of IPGMediabrands. Speaking of the ad industry, he said "We don't have the motivation to be more efficient because we're paid to be inefficient."  Seiler said his company has committed to increasing  the percentage  of automated ad purchases from 5 percent to 50 percent in just three years.

Seiler noted that in order for automated ad buying to work, there has to be someone doing automated ad-selling. "It's probably a surprise to a lot of you here that AOL would be that one." No pun intended.