AOL CEO Tim Armstrong: Yahoo deal helps Verizon against Facebook, Google

Tim Armstrong, chairman and CEO of AOL
Melody Hahm | CNBC

AOL CEO Armstrong told CNBC that combining the power of Yahoo and AOL could give Verizon Communications the necessary tools and reach to become a major powerhouse in digital advertising.

"Google and Facebook are doing such a good job executing," said Armstrong, who helped lead Verizon's successful bid for Yahoo. "Trying to do what Google and Facebook do is not a good strategy ... We're the up-and-comer. We're going to compete for the gold medal in the future. We have to have a differentiated performance."

Verizon announced on Monday that it would be acquiring Yahoo's operating business for $4.83 billion in cash. The company said in a statement that Yahoo would be integrated with AOL under the leadership of Marni Walden, executive vice president and president of product innovation and new businesses at Verizon.

Armstrong explained that Google's power was based on its search capabilities and Facebook was the leader in social media. He said he believed Verizon's strength was in building a "house of brands," explaining that the acquisition would help strengthen Verizon in three key ways.

Yahoo currently has more than one billion active monthly users, including 600 million monthly active mobile users. When it gets folded into Verizon's portfolio, the telecommunications company will have access to online behavioral data on those consumers.

It will also have the ability to place advertising on some of the most trafficked destinations online, including Yahoo News and Yahoo Sports.

In addition, Yahoo user data could be combined with insights from Verizon's mobile, internet and cable customers. The information will help power Verizon's programmatic ad technology platforms, which utilize consumer behavior to determine which digital ads to display.

AOL's programmatic ad platform, One by AOL, was one of the main drivers behind Verizon's purchase of the company in May 2015. Verizon will further bolster its position with Yahoo's programmatic video platform, BrightRoll, and mobile analytics firm, Flurry.

"Ad tech plus really strong content investments creates a very differentiated approach that consumers are willing to adopt and brands are willing to pay for," Armstrong said.

Marissa Mayer: 'I plan to stay at Yahoo'
Marissa Mayer: 'I plan to stay at Yahoo'

As for the future of Yahoo's leadership, Verizon's Walden said earlier on CNBC's "Squawk Box" that no decision had been made. Yahoo CEO Marissa Mayer told CNBC's "Squawk on the Street," meanwhile, that she wanted to see Yahoo "into the next chapter."

Armstrong—who previously one of Google's top ad executives—would seem the logical choice to help run Yahoo, given Verizon's emphasis on digital advertising. When asked if he would have a leadership position in Yahoo going forward, he called Mayer an "important leader," and said Verizon's companies were typically led by their respective brand leaders.

"We've agreed to sit down and go through the strategy and structure, and make sure it's a good fit on all sides," he said. "The Yahoo brand is a brand we will continue to invest in."

The Yahoo deal did not include Yahoo's cash, convertible notes, certain minority investments and non-core patents (known as the Excalibur portfolio.) It also did not include Yahoo's Asian assets, including its Alibaba Group Holdings stake (it owns 15 percent in the Chinese e-commerce giant) or Yahoo Japan (in which it owns a 35.5 percent stake). Those assets will continue to be held by Yahoo, but the names will change and become a registered, publicly traded company when the deal closes.

Disclosure: CNBC has a content-sharing partnership with Yahoo's finance site.