On the Eve of Turning 30, AOL Dials Up Mobile and Video

CEO Tim Armstrong tells us what the future holds

AOL is about to turn 30 years old. In May, the company that basically invented Web surfing hits this milestone—and yet somehow, despite its adulthood, finds itself at the very beginning of a whole new era. Yes, the once and future king of dial-up faces the daunting task of figuring out its mobile strategy.

CEO Tim Armstrong is clearly confident AOL is still a dominant and decisive Internet company, one that beats rivals and consumers to the next digital levels. Today, that next level is mobile. It's fast wireless networks streaming data to devices on the go—and Armstrong has a plan to keep AOL in that sweet spot, just like the glory days when it ruled our desktop computers.

"At a very simple level our ability to update the AOL brand has really been to change faster than the consumer's changed, and faster than the industry changes," Armstrong says in an interview at AOL's offices. "You've seen us make really bold moves in content, in video and in programmatic advertising—and a huge driver of that is what we expect to happen in mobile."

Armstrong has a deep digital advertising background and took over AOL after leading ad sales at Google. He has a reputation in the industry for maintaining the hardest working team in advertising. "It has the best sales culture compared to other big platforms," says Jared Belsky, president of 360i.

In the past two years, AOL's ad technology has grown healthily. Last year, it bought Adap.tv, a marketplace for selling digital video ads, taking the company from zero dollars in video revenue to hundreds of millions, the CEO says. AOL also owns The Huffington Post and TechCrunch, two mobile-heavy businesses.

Armstrong throws out some impressive-sounding stats: Half of AOL's monthly visitors are mobile. More than 50 percent of its ad revenue comes from multiplatform sales, which span desktop and mobile. HuffPost is the No. 1 sharer of content on Facebook. "The future is social, mobile and video, and AOL has a big presence in each of those areas," he says.

There's an obsession with mobile and video, and it's easy to see why when you figure people will be attached to their devices most of the day and most of what they'll be consuming—sucking up to 80 percent of the bandwidth, by Armstrong's estimation—will be video. By 2020, the mobile world will run at 5G speeds, 100 times faster than what the 4G mobile networks from wireless carriers deliver today, he adds.

That's a long way from when you popped an AOL disk into your laptop and connected through your phone line. AOL was a gateway then to the Internet. Interestingly, its plan for keeping (or regaining) that position is actually familiar. "The core human need that AOL serves is as a content brand, and its ability to help other content brands get to consumers," says Armstrong. "Consumers today and in the future will have a need for really big content brands to curate the world for them."

But the reality is, there are others with a solid claim on that space, most notably Facebook. The social network is the biggest challenge for any company looking for mobile advertisers, ad execs like Belsky say. Facebook has a pretty tight grip on what it offers advertisers to reach consumers on mobile devices, what it knows about those users, and how it promises delivery of advertising to those users.

And with Facebook devoting massive resources to video—developing a sophisticated ad product and network in the past year—AOL has a steep hill to climb. By most measures, AOL falls short of the top 10 in terms of mobile ad revenue in the U.S. (To be fair, Google and Facebook tally more than 50 percent, according to eMarketer.) In worldwide digital ad revenue, AOL ranks No. 10, with 0.81 percent of the market last year, according to eMarketer.

"Everyone is chasing Facebook in a sense that it figured out the holy trinity of mobile—which is to say proximity­, scalability and targetability," Belsky says. Facebook delivers a consumer with a location attached, it knows his or her affinities, and it can guarantee a reach of up to 1.4 billion people. How does any company except for Google fight that?

The biggest problem facing AOL: What is its signature app, its special mobile technology? Belsky notes that, similarly, other Web 1.0 survivors like Yahoo have developed mobile lines, such as its Gemini native ad network built for its highly trafficked mobile apps like Yahoo Finance and Weather. Even Twitter owns a large audience and mobile ad network.

Armstrong responds that AOL will have its answer, its blueprint to grow its mobile audience, sometime in the first half of this year—but he's not ready to talk about it now. Whatever his strategy, it will involve video on such properties as HuffPost, TechCrunch and MAKERS (AOL's digital video library featuring powerful women in positions of leadership). "For 2015, the focus is on a limited set of really powerful brands," he says.

One hint at AOL's mobile future: Armstrong points to the just-launched Rise, which he calls the first live morning news show designed specifically for mobile consumption. In the coming months, there will be new tools for all AOL users to play with video on mobile as well.

Says Armstrong: "The next step in video for us is the combination of creation and content. We have some products coming out in the first half of this year, which will not only allow people to have a much better experience on mobile with video—in terms of what the players are and the type of content—but also the ability to actually create video on mobile as well. So we have a couple of products that … I'm excited about."