"There is a major digital revolution coming": Aol's Ran Harnevo on $405m Adap.tv acquisition and future of the online video industry
Last week, Aol announced the acquisition of Adap.tv, in a deal worth $405m,
The global, programmatic video advertising platform supported more than 26,000 global ad campaigns in 2012, which ran on approximately 9,500 websites and was used by many top brand advertisers including T-Mobile, Mars Wrigley, P&G, Bank of America, Kia, Jeep, Ford, Toyota and Chrysler.
To find out what the deal means for Aol and how it will help shape this rapidly expanding part of the industry, The Drum spoke with Ran Harnevo, SVP Video at Aol.
This is Aol's largest acquisition in history - why has it spent so much on adap.tv?
Consumers are locked in video content in a place that really, I don’t think we’ve seen before. The result of that is that money is coming to that industry from everywhere. Money is coming to online video, from display ads, from search, and from TV. And from that perspective I think Aol has made a really smart bet from the get-go, to bet on the online video space as really the place where growth is happening.
Aol has spent over $600m in the last three years just to acquire the companies, including Adap.tv, that really built the infrastructure of what we’re trying to do here. And we feel that it’s really the best space to put your bet on when comes to digital.
So why Adap.tv?
The most interesting thing about the video space as a whole is that it is extremely fragmented. In the US, and worldwide, we’re not seeing things that we saw with TV, where we stared with three or four broadcasters getting most of the ratings and the inventory. What we’re seeing in online video is that there is deep fragmentation of the experiences and the viewing. And I think that from our perspective is what’s clear to us is that because the market is so fragmented, the only thing that will really solve the complexity around advertising in video is technology and software.
What Adap.tv has made, that no one else really has in this space, is thoughtful infrastructure for seamless advertising and connecting buyers and sellers in one platform with no middle men. If you look what happens in digital, you have a lot of middle men in the transaction. You have a company that is doing the demand side, and another that is creating the supply side, then you have exchanges, and data providers. And with Adap.tv it is seamless technology that is highly scaleable, that creates a platform where thousand of publishers and thousands of advertisers can meet and transact in unprecedented efficiency.
I think there is a lot of vagueness around the adtech space, and people are reaching out to manage the ad networks and comparing them to pure programmatic platforms. But with what adap.tv has made, they totally automate it and the way video is getting sold and bought on the internet. We didn’t see anything else that is close to that.
How will it work with Be-On, your branded entertainment platform?
In terms of integration, we’re waiting. We just bought the company and we’re not going to integrate it immediately. We’re not going to do anything on the get-go but when we talk about automisation of the inventory what we will try to do in the future is to have buyers transact and buy all kinds of video formats in a much more efficient way that will probably increase the yield of all sides. From a technology perspective that would be number one. Secondly, is to take it internationally.
We believe that programmatic buying is being adapted faster in Europe than it is in the US, and there is a lot of appetite from both the publisher side and agency side to adopt the platform. In a lot of ways adap.tv completes Be On, not necessarily with integration but overall we have created a very powerful video stock the is able to offer the agencies, the holding companies, and the clients not only access to branded entertainment distribution, but also access to platforms that would allow them to buy video advertising in a much more efficient and scalable way.
One of the first things we are going to do is to significantly increase our efforts outside of the US.
More generally, how are you seeing this part of the industry growing?
There is a major digital revolution coming in front of us, and there are two pillars that are really driving this revolution. Firstly, we believe TV dollars will shift and money from TV will shift into IT delivered experiences. Connected TVs are growing at a crazy pace as well as the adoption of mobile and smartphones. So people are consuming more and more video content on IP delivered devices and there is no question that money is going to flow from there. The second pillar is this shift to programmatic buying.
If you combine these two, I think that adap.tv is really sitting front and centre of these opportunities. We believe that in general, this business is going to grow across the world because of the transformation to more devices, to more IT delivered experiences. This is the most growing industry in terms of advertising spend. The main challenges that companies will have is that it’s a fragmented. The main question for big publishers and media companies is: Are they going to be innovating and ahead of the trends and take risks in order to be really ready for that transformation? Or are they behind, and trying to put their hands on just some of the activity?
This is going to be a one in a decade transformation. It puts us ahead of the curve in terms of the opportunity to be big part of the transformation, which is going to happen. Everyone feels it their daily lives.