AOL took another step today toward becoming a major player in digital video with the $405 million purchase of Adap.tv, a video advertising platform. The acquisition of Adap.tv is the largest of AOL chief executive Tim Armstrong's tenure so far.
Adap.tv will be an independent part of AOL's video division. It offers publishers programmatic ad-buying solutions, which means that ad buys are done through computational algorithms, like much stock trading nowadays. On Adap.tv's platform, brands can buy and sell video advertising inventory, such as 30-second ads that air before YouTube videos.
"AOL is a leader in online video, and the combination of AOL and Adap.tv will create the leading video platform in the industry," said Armstrong in a statement. "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."
AOL also reported earnings today. While its second-quarter revenue increased 2 percent to $541.3 million from the second quarter of 2012, its income plunged 97 percent to $28.5 million from $970.8 million at this time last year. But that quarter's numbers were boosted by a patent licensing deal that netted the company more than $1 billion, according to earnings reports, so it isn't an apples-to-apples comparison.
AOL is shifting to branded media content as its subscription business continues to decline, though it isn't shrinking as fast as one might expect. Millions of people are still paying to connect to the internet through AOL. The internet giant earned $166 million on subscriptions in its most recent quarter, a 5.4 percent decline from the previous year's second quarter.
That number is an improvement on the 12-percent decline in subscription revenue AOL saw during the second quarter of last year, which was the lowest rate of decline in five years, the company said. Obviously, AOL can't rely on dial-up subscribers forever, and tapping the revenue they generate to help pay for a forward-looking acquisition looks like the right move.