AOL to host 'upfront' for selling ads via electronic exchanges

Wed Jul 24, 2013 10:08am EDT

The AOL logo is seen on the outside of the building housing the companies corporate headquarters in New York May 28, 2009. REUTERS/Lucas Jackson

The AOL logo is seen on the outside of the building housing the companies corporate headquarters in New York May 28, 2009.

Credit: Reuters/Lucas Jackson

(Reuters) - AOL Inc plans to host an "upfront" advertising event aimed at selling online ads through electronic exchanges, making a big bet that the buying and selling of ads will increasingly be handled by machines.

Known in the ad industry as "programmatic," electronic exchanges allow advertisers to bid on and place ads on a variety of websites - for example, on AOL's Huffington Post.

AOL's announcement on Wednesday for the "Programmatic Upfront" during Advertising Week in September will mark the first time that a company will hold an event on how ads are bought and sold in real-time.

Increasingly, brands and advertising firms are turning to electronic trading platforms for digital ad buys, though it is a complicated landscape with scores of players.

"The premise is to make it simple," said Bob Lord, the CEO of digital ad agency Razorfish, who will step into the role of chief executive of AOL Networks on August 1.

The upfront ad sale events are a way for media and internet companies to court advertisers and get them to commit a sizable budget for the entire year. Upfronts are an annual tradition with broadcast networks and cable channels, but in recent years Internet companies like Yahoo, AOL and Google's YouTube have adopted the concept.

Getting more dollars from advertisers is key to AOL's survival as it rebuilds itself into a media destination, especially as revenue from its subscriber dial-up service quickly dwindles. AOL owns the Huffington Post and TechCrunch.

U.S. advertisers are estimated to spend more than $3.3 billion on real-time bidding on electronic trading exchanges this year, up 65 percent from 2012, according to market research firm eMarketer. The fight to win over brands and advertisers has intensified with Google, Facebook, AOL and Yahoo all competing for ad dollars.

Yahoo last week reported a 12 percent slide in the price-per-ad in the second quarter. Analysts pointed to rise of advertising exchanges, which are putting pressure on ad costs.

AOL Chief Executive Tim Armstrong believes that the exchanges can also lift prices because they will allow advertisers to buy and place ads in real-time but also enable them to switch out creative campaigns.

"It's either the start of a mega trend or an anomaly," Armstrong said on Tuesday. "We think it's a trend."

(Reporting by Jennifer Saba in New York)