AOL Inc. (NYSE: AOL), on Wednesday, said that it has agreed to acquire video advertising platform Adap.tv Inc, for $405 million, in its biggest acquisition in recent years.
Tim Armstrong, AOL's CEO, said that the purchase would help the online media giant to integrate its video content service with a large and growing base of publishers and advertisers in digital media.
New York-based AOL, in recent months, has intensified its efforts to boost its revenues from electronic trading in advertisements, where it competes with companies such as Google Inc (NASDAQ:GOOG), and Yahoo Inc (NASDAQ:YHOO).
Video advertising is still in its nascent stage -- forming a small part of the larger digital advertising market -- but is expected to nearly double in four years, climbing from $4.14 billion in 2013 to $8.04 billion in 2016, according to research firm eMarketer.
Based in San Mateo, Calif., Adap.tv offers digital video programmatic advertising -- a form of electronic advertising that enables advertisers to target a specific audience -- through electronic trading desks.
According to forecasts, programmatic trading of ads is expected to grow by more than 70 percent this year.
"Two trends are prevalent in the video space right now – the movement from linear television to online video and the shift from manual transactions to programmatic media buying. Adap.tv is positioned squarely in front of the huge opportunity these trends are presenting," said Armstrong.
The deal also would help AOL to benefit from a growing trend of combining television and video ad purchases among publishers and advertisers.
“We believe that most TV advertising will soon be traded programmatically on platforms like ours. The combination of AOL and Adap.tv accelerates our vision of efficient and effective TV and video advertising," he added.
AOL will pay $322 million in cash and about $83 million in stock for Adap.tv, the company said in a statement. The current deal would be AOL’s biggest purchase since its acquisition of Huffington Post for $315 million in February 2011.
On Wednesday, the company posted second-quarter results that topped analysts’ estimates and raised the guidance for its full-year results.
AOL's second-quarter profit fell 97 percent to $28.5 million, or 35 cents a share, from $970.8 million, or $10.17 a share, a year earlier and revenue rose 2 percent to $541.3 million. Analysts polled by Reuters had expected the company to post a profit of 32 cents a share on revenue of $539.6 million. The company attributed the fall in net profit to its one-time earning of $1 billion in a deal to sell and license patents to Microsoft (NASDAQ:MSFT) last year.
AOL's shares ended up 1.41 percent, following better-than-expected quarterly earnings. In the year to date, the company's stock has gained 25 percent.