Advertising Week 2015

Why AOL's Tim Armstrong Says Advertising Is About to Get 'Exponentially More Expensive'

Not Much Sympathy, Meanwhile, for Ad-Blocking Victims

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AOL CEO Tim Armstrong speaks at an event in 2014.
AOL CEO Tim Armstrong speaks at an event in 2014. Credit: Jason Alden/Bloomberg

If marketers are surprised today by how much more automated ad buying costs than traditional methods, they have a new state of shock and awe ahead of them, AOL CEO Tim Armstrong said Wednesday in a talk during Advertising Week.

"Advertising is going to get exponentially more expensive," Mr. Armstrong said.

That's because every time e-commerce makes another purchase routine, it gets that much harder for marketers to tempt consumers into a switch. That's especially true with the rise of subscription services and Amazon's physical buy buttons.

"Personally I just signed up for a huge fleet of subscription services at my house," Mr. Armstrong said.

It's one thing to convince shoppers to try something new when they're wandering a supermarket with an empty cart, running into two-for-one shelf promotions and the like, he suggested. But what kind of advertising effort will convince a shopper whose cart is always already full to remove an item and replace it with something new?

"You're going to have to pay a lot of money to convert someone," Mr. Armstrong said.

AOL is working on a "bunch" of e-commerce ad units itself, he noted.

Ad blocking isn't likely to help the economics for marketers, but Mr. Armstrong said the industry has to approach that challenge the right way.

"Everyone is spending all their time talking about ad blocking right now," he said. "Everyone should be spending all of their time talking about why consumers feel the need to block ads."

AOL just did a "huge review" of the kinds of ads it should be serving to consumers and how, he added.

Right now ad blockers look like the big disruptors of the moment, but in the future the disruptor will be some company that figures out how to do advertising differently, Mr. Armstrong said. "We're all going to live in an invisible prison if we think ads are going to stay the way they are today."

"Few things are more annoying than pop-ups on mobile," he said.

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