AOL buys video start-up for $405M, beats earnings estimates

AOL(s aol), which has been aggressively positioning itself as a serious competitor to Google(s goog) and Yahoo(s yhoo) in the online ad business, on Wednesday announced the acquisition of automated video ad server Adap.TV, and also posted its regular quarterly earnings which beat analysts’ expectations.
The acquisition of adap.TV for $405 million confirms recent rumors, and gives AOL another piece to complete its ad tech stack — a set of tools that allow publishers and brands to buy and sell online ads in real time. CEO Tim Armstrong is building up AOL’s ad tech stack in order to attract revenue from third parties, and also to give a boost to the company’s own publishing properties like and the Huffington Post.
AOL’s quarterly results, were announced early Wednesday morning, showed earnings per share of 35 cents, which was two cents higher than analysts had predicted. Its overall revenue was up 2 percent from a year ago.
The earnings largely mirrored AOL’s earnings from last quarter that showed the company enjoying solid growth for its ad network unit and publishing properties, while the dial-up subscription business that is AOL’s cash cow continues to decline.
The results also showed that AOL’s publishing business is approaching profitability. The so-called “brand group” posted a loss of $1.8 million compared to a $15.2 million loss from the same quarter a year ago; a big portion of the earlier losses resulted from Patch, AOL’s ambitious but troubled attempt to create a national network of local news sites.
Overall, the earnings and acquisition news continue to reflect a remarkable turnaround from early 2012, a time when the company’s ad and publishing businesses were floundering and AOL was selling off assets like its patent portfolio for cash.
The purchase of could be a significant asset to AOL if the market for online video ads continues to grow. The segment has been a bright spot at a time when the overall online advertising business has been under strain due to falling display ad prices.
The acquisition is also consistent with Armstrong’s goal of consolidating and simplifying the ad tech industry, which is now composed of numerous small companies offering various bits and pieces of ad technology. In July, Armstrong announced an ambitious plan to grab TV ad dollars through a “Programmatic upfront” at which brands will agree to commit major money ahead of time to buying ads online.
The AOL earnings call is taking place at 8amET. We’ll be on it and pass on any highlights.
Correction: this story has been amended to reflect that AOL’s revenue — not profit — was up 2% from a year ago. It also corrects a typo in the fifth paragraph to say “millions” rather than “billions.”