AOL Targets Programmatic Video Advertising With Adap.tv Acquisition

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AOL is making a fresh $405 million bet on programmatic video advertising by acquiring Adap.tv. The deal gives AOL a power punch in online video with large investments aimed at strengthening its role and influence on the consumer and brand side of video.

Adap.tv supported more than 26,000 ad campaigns on 9,500 sites last year. The deal, which is expected to close before the end of the current quarter, makes AOL the “second largest player in video and more importantly the leader in programmatic video,” says Tim Armstrong, chief executive, AOL.

“Two trends are prevalent in the video space right now – the movement from linear television to online video and the shift from manual transactions to programmatic media buying. Adap.tv is positioned squarely in front of the huge opportunity these trends are presenting,” Armstrong notes in a prepared statement. The acquisition marks the largest deal to date since Armstrong joined the company in 2009.

Adap.tv will run independently but under the umbrella of AOL On Network, the company’s connected TV app. The San Mateo, California-based company will join other AOL networks brands like Advertising.com, Be On, ADTECH and Pictela.

“At Adap.tv, we are focused on building the most important business within the most important category in digital advertising,” Adap.tv chief executive and founder Amir Ashkenazi says in a prepared statement. “We believe that most TV advertising will soon be traded programmatically on platforms like ours. The combination of AOL and Adap.tv accelerates our vision of efficient and effective TV and video advertising.”

AOL and Adap.tv are valuing the acquisition in terms of the ongoing shift from broadcast TV to online video. “When you take this in the context of the $240 billion TV industry and this massive revolution that it’s going through, very similar to what we’ve seen in digital photography and music, then I think it’s easier to understand the impact that this deal can make,” Ashkenazi says in an interview with Bloomberg West. “This partnership can actually advance the implementation of our dream, of being the platform that really connects TV and video advertising.”

Adap.tv says its revenue has more than doubled in each of the last three years. Despite whispers of an initial public offering, the company appears to have avoided a potentially rough ride similar to what its competitors Tremor Video and YuMe have experienced this summer. Adap.tv was founded in November 2006 and raised a total $48.5 million in funding before AOL came knocking with $322 million in cash and $83 million stock.

“AOL is a leader in online video and the combination of AOL and Adap.tv will create the leading video platform in the industry,” says Armstrong. “The Adap.tv founders and team are on a mission to make advertising as easy as e-commerce, and the two companies together will aggressively pursue that vision.”