AOL Banks on Ad Market Rationality to Drive Revenues

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Data-driven rationality is driving the online ad market, but AOL needs to play catch-up to harness that trend. AOL CEO Tim Armstrong said as much during this morning's Q2 earnings call with investors during which the company reported 6 percent global ad revenue growth compared to Q2 2011, propelled by international display and third-party ad network growth.

Ad revenues hit $337.8 million in the second quarter, however domestic display revenue was flat at $126.8 million. It was international display revenue - which grew by 21 percent to $13 million - that buoyed overall display to 2 percent growth, AOL reported.

Meanwhile, the third-party Ad.com network brought in $111 million, a boost of 19 percent year-over-year. The company said it is focused on optimizing campaigns for advertisers in the network.

"There's significant value in this particular area of AOL," said COO Artie Minson during this morning's call, noting that the firm's ad management platform AdTech is an "integral part" of its ad business. AOL plans to expand mobile capabilities on the platform.

But it's AOL's own properties the company aims to build up as a go-to premium buy for brand advertisers. Display revenue on AOL properties grew by 2 percent. The company is betting on premium ad formats such as its rich-media laden Project Devil units to entice brands to spend more. AOL reported that more than half of the advertisers who bought the ads in Q1 re-upped this past quarter.

Armstrong admitted that last year the company's focus was not data-driven, and stressed the firm's renewed mission to ensure that data - meaning results-related numbers proving the value of buying AOL's ad products - is at the heart of its sales approach. People cannot leave the building without data, said Armstrong.

Mobile and video ad revenue are key to future growth for AOL, said Armstrong, who said that last summer 75 percent of insertion orders included both platforms. Today, it's close to 100 percent, he said. The company reported that videos, video views, and video revenue rose at double-digit rates, though it did not break out revenues for video advertising.

Armstrong also emphasized the ad sales organization's verticalized approach, suggesting that certain advertiser verticals including auto will prompt new customized ad products in the future.