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Programmatic Advertising: A Fool’s Wager for AOL?

Plenty of companies are testing the programmatic ad waters, but the track record is iffy

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AOL (AOL) Chief Executive Tim Armstrong is making a big bet on programatic advertising to help keep the ol’ Internet giant ticking.

aol_logoUnfortunately, a number of other companies are betting on the ad system, too, and the results haven’t been promising.

Everybody, Into the Pool!

The parent company of Huffington Post and Moviefone recently announced the launch of One, a new programmatic advertising platform — a fancy way to say that it sells ads through automatic exchanges.

These ads, according to some experts, tend to sell at rock-bottom rates, in part because advertisers don’t have any control over where they are placed.

AOL, not surprisingly, doesn’t see pricing as an issue.

“Automation does not change the value of premium and we believe premium brands, inventory, formats, audiences and experiences can and will achieve premium prices in a programmatic environment,” spokeswoman Caroline Campbell, said in an email. “If publishers know the true value of their inventory (backed by data) they should be indifferent as to how the inventory is sold.”

And even though AOL’s end-to-end solution is more comprehensive of most … it’s still just one of many, many faces in the programmatic advertising crowd.

For instance, Yahoo (YHOO) unveiled its programmatic advertising service last year and announced an upgrade in January. Google (GOOG) has a service that counts magazine giant Time Inc. as a partner. News Corp. (NWSA) is trying to cash in on the same trends; the company announced last year that it would launch a new programmatic advertising platform and began wooing advertisers to its network during the upfronts last year.

Programmatic advertising spending is expected to account for 30% of digital ad spending, or about $9 billion, in 2016 vs. 20% in 2013. While that forecast is certainly encouraging, it’s important to remember that digital ad prices are trending lower on big sites such as Google, where they plunged 11% in the latest quarter. Twitter’s (TWTR) ad prices fell by 18% in the last three months of the year.

The microblogging site, of course, has jumped on the programmatic bandwagon, too.

Problems With Programmatic Advertising

It’ll be interesting to see whether ad sales for AOL’s marquee properties can maintain their pricing power. After all, programmatic advertising sales have yet to pay off for many publishers.

During the latest quarter, revenue at News Corp.’s News and Information business fell by 9% year-over-year, and CEO Robert Thompson said the advertising climate was “challenging” — perhaps the understatement of the year.

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Article printed from InvestorPlace Media,

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