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Summary:

AOL announced a “Programmatic Upfront” in September at which it hopes brands will commit to spending millions of dollars.

Tim Armstrong, CEO, AOL
photo: Getty Images / Michael Kovac

The online ad industry often looks with envy at the buckets of money that advertisers pour into television. Now, AOL thinks it has a way to wrest away some of that moolah.

On Wednesday, the company announced an inaugural “Upfront” for the online ad industry that it says will attract more than 150 clients, media, analysts and investors. The idea is to create a semi-annual event that resembles the massive TV Upfronts in Los Angeles at which brands and agencies commit to buying television ads ahead of time.

Tim Armstrong, AOL’s CEO, revealed to reporters at a Tuesday dinner that he expected the so-called Programmatic Upfront, slated for September 23, to give rise to a series of $50M to $100M deals.

“In the next three to ten years, you will have an upfront commitment to programmatic that will rival TV,” said Armstrong.

Armstrong also stated the Upfront would be open to its competitors in the online ad industry such as Google, Twitter and Yahoo (those companies have not to say if they will attend).

The announcement comes as AOL tries to persuade agencies and advertisers to use its integrated stack of ad technology to reach consumers online. The company claims that its “stack” approach is cheaper and more efficient for brands than engaging with the motley group of ad tech companies depicted in an infamous slide known as the Lumascape.

Armstrong claims that many of the smaller players in the ad tech space will be acquired or swept away as the process for automated ad-buying becomes more mature. He added that more large clients are now comfortable using machines to buy big volumes of ad inventory.

The September event, then, could well amount to a moment of truth for AOL and the ad tech industry as a whole. While many accept the theory of programmatic buying — in which buyers and sellers meet in exchanges to buy ads in real time — it is still yet to be embraced full-on in practice. Ad buyers remain wary because of ongoing fraud and measurability issues; publishers, meanwhile, fret that automated buying leads to lower ad prices.

In Armstrong’s view, more parties on both sides will come to embrace programmatic buying as the process becomes more transparent and easy to understand, in part through events like the “Programmatic Upfront.”

While the September event could kickstart more automated ad buying, Armstrong also had to explain why an “upfront” is necessary in the first place; after all, the premise of automated buying is that it takes place in real time — unlike TV, where advertisers need to secure scarce inventory ahead of time.

According to Armstrong, an upfront makes sense because corporate budget allocations, even if they are not committed to a locked-in advance media buy, can’t be spent in a “jump ball” fashion. He added that the essential bargain in an upfront contract will be an advertiser agreeing to “walk onto AOL’s ad stack” in exchange for a guaranteed ROI.

At the dinner event, one reporter asked AOL executives if the automated advertising event would feature celebrities like Sarah Jessica Parker who attended the “Newfronts” event for online videos this spring. The executives said they are still planning the celebrity angle.

 

  1. Ad space scarcity is much greater in the the TV space (actually, just another way of saying channel startup costs are greater).

    So long as this is true, TV CPMs ($10+) will always be much greater than internet CPMs (50 cents and falling).

    Infinitely greater ad space supply = much lower CPM rates.

    All the “upfront” BS (and it is BS in the TV market too…) doesn’t change the supply and demand realities.

    Ironically, programmatic will probably make things *worse* for your average website (due to the commoditization of audiences).

    Between this and Patch, you really have to wonder if Armstrong actually understands the economics of the internet.

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