AOL CEO Tim Armstrong: Merger With Yahoo Is a 'Dead Notion'

AOL CEO Tim Armstrong: Merger With Yahoo Is a 'Dead Notion'

AOL CEO Tim Armstrong

The idea that AOL and Yahoo will merge is a "dead notion," Tim Armstrong, chairman and CEO of AOL, said on Monday.

Armstrong said his company is focused on growth, noting that AOL has been expanding revenue and profit for eight consecutive quarters, with high growth rates in its video content and automated advertising businesses.

"We have to really make a decision whether we want to take a step back, and go back and think about doing something like [a merger], versus, do we focus on growth?" he told CNBC's "Squawk Box."

Asked what type of acquisition AOL would consider, Armstrong said the company is focused on scaling up three things: supply, customer data, and its video and automated ads.

"You should assume we're going to do everything we possibly can to move those three things forward," he said.

Armstrong appeared on CNBC's "Squawk Box" ahead of its presentation at Newfronts, a two-week event during which marketing teams preview upcoming online video content. It serves as the digital video version of broadcast television's Upfront season.

Like Netflix and Yahoo, AOL is pushing into the market for original content. Its slate of 16 original shows attracted a total of 185 million viewers last year and turned a profit, Armstrong said.

AOL's video business grew 90 percent last year, and advertisers are chasing that growth, he added.

"There's 900 million paid connections to TV in the world. There's roughly going to be about 4 billion people with smartphones in the next couple years, so you have a massive market of both paid TV and machines in people's pockets that act like cable boxes," he said. 

As for whether a content bubble is forming, Armstrong said he expects that the current output of about 70 million hours of high-quality content produced each year in the United States can double.

On the ad side, machine-assisted programming—or programmatic advertising—has helped AOL go from making 300 million ad placement decisions per day four years ago to 1 trillion today, Armstrong said.

That has helped the company grow its ad prices in the double digits for the last four years, he said.

"You look across the major companies, all of them are now involved in digital, and I think this is the first year where you're going to see the Newfront, the business we're in, and the Upfront really collide," he said. "I think advertisers are going to push those two things together this year and it's going to be a big change."

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