Tim Armstrong told analysts on Wednesday that AOL $405 million investment in Adap.tv is as much about people as it is about profits.
"Our ability to get very very talented people here is really the reason that we did the Adap.tv purchase…what drives good ideas and good technology are the people," Armstrong explained.
The AOL CEO and chairman said that the company will not buy companies unless their leadership teams agree to remain on board. In the case of the San Mateo, Calif. based digital advertising service that team includes Adap.tv CEO Amir Ashkenazi, who will operate the company as part of AOL’s video division. It will be run independently and its leadership will report to Ran Harnevo, AOL's senior vice president of video.
Talent wasn't the only motivation for the largest acquisition of Armstrong's tenure, however. The AOL chief is banking heavily on digital video to drive future growth and is particularly obsessed with programmatic ad-buying. As TechCrunch succinctly explains, this automated process involves getting companies to bid on video advertising in "real time" and in a "data-driven" way.
The purchase is another sign of the growing emphasis on online video throughout the tech space. USA Today points out that spending on digital video advertising is projected to increase more than 40 percent to $4.09 billion this year, which helps explain the price tag.
Armstrong said that the company had been exploring options for ways to improve its position in the space for much of the last year, and debated the merits of buying different companies or building its own in-house infrastructure. It ultimately opted to go the acquisition route, he said, after determining that Adap.tv was the leader in programmatic advertising.
"Adap is a true technology company…it is engineering led and driven," Armstrong said, hailing Adap.tv's team of computer scientists as the best in the business.
The price is certainly gaudy, but AOL said Adap.tv has put up impressive numbers. Revenues have grown 100 percent over each of the last three years and the company has supported more than 26,000 ad campaigns over 9,500 websites.