AOL announced it has reached an agreement to acquire the video ad exchange platform company Adap.tv for $405 million.
The deal puts AOL squarely in the middle of the ongoing shift in Web advertising toward programmatic buying—a place from which CEO Tim Armstrong believes AOL can challenge the likes of Google. Though the Web video ad market has been slower to embrace machine-based buying compared to display, many experts see that shift as inevitable, and Armstrong clearly wants AOL to lead.
The evidence is growing more compelling by the day. According to eMarketer, Web video ad spending will surge by 41.4 percent to $4.09 billion in the U.S. Meanwhile, eMarketer says that programmatic ad buying, including display and video, will balloon by 72.7 percent to $3.32 billion this year in the U.S.
"AOL may now also have one of the best collections of video assets, combining AOL On's rich content syndication with Adap.tv's robust programmatic platform," wrote Brian Pitz, Equity Analyst at Jefferies in a recent note.
Adap.tv was founded in 2006 by Amir Ashkenazi and Teg Grenager. The company's platform serves both buyers and sellers, helping sites serve video ads and manage yield while aiding brands in targeting and tracking video campaigns. According to AOL's press release announcing the deal, Adap.tv's revenue has grown over 100 percent year over year for the past three years. Last year, the company helped execute 26,000 global campaigns on approximately 9,500 websites.
"AOL is a leader in online video, and the combination of AOL and Adap.tv will create the leading video platform in the industry," Armstrong said in a statement.
AOL said it plans to manage Adap.tv as a separate company going forward. The $400 million deal includes $322 million in cash and $83 million in AOL stock.
The news comes as AOL announces Q2 earnings on Wednesday. The company said total revenue climbed 2 percent to $541.3 million. Global display revenue grew 5 percent to $361.2 million, and AOL saw decent growth for search, its owned properties and its third-party network business.
More details to come as this story unfolds.