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Posted by Jim Nail on August 8, 2013
I talked with several reporters yesterday about AOL's $400 million purchase of online video technology company Adap.TV. A popular question was "Why is a media company buying a technology company?" as if they had no business being combined. The published coverage focused on the value of their technology for programmatic buying and its future application to TV as the digital evolution disrupts today's television advertising industry. Important, but I think misses a more fundamental issue: Content may be king for consumers, but the consumer is king for advertisers. And to deliver consumers to advertisers in the way they want, content companies will need to have strong technology backbones.
AOL has always trumpeted that content is king -- I remember the Bubble 1.0 days (pre AOL Time-Warner, even!) when Ted Leonsis virtually coined this phrase. Even since the Time-Warner split, AOL has continued to pursue the content-centric strategy with the acquisition of The Huffington Post, Tech Crunch, and video syndication firm 5min Media. Until now.
AOL recognizes that the trend in programmatic buying says that advertisers no longer want to buy ads against content with a large diverse audience. They want media companies that have a large diverse audience paired with the ability to deliver ads to very specific audience profiles. The advertisers needs scale plus targeting, so media companies now need great content plus the technology to cherry-pick just the viewers the advertiser wants to reach. Either alone is not sufficient for a viable media business in today's digital world.
So we've reached the point where questioning why a media company would want technology is like asking why a television station would want technology like camera, sound equipment, antennas. In a digital world, you can't do business without it.