AOL* CEO Tim Armstrong on Wednesday night defended the user data tracking practices his company is set to adopt next month as part of its acquisition by Verizon.

Earlier yesterday TechCrunch reported Verizon would combine its user tracking ad network with AOL’s existing ad services. In an interview with Kara Swisher at Code/Mobile in Half Moon Bay, Armstrong said more data provides more benefits for consumers.

He said the market would prevent companies from abusing the swarths of data they collected.

“If consumers don’t trust you it’s not worth whatever you’re going to do with the data,” Armstrong said. “Verizon is probably more sensitive to data than most Internet companies.”

Armstrong said he would not want to be at a company in the future that had the opportunity to gather and optimize data and didn’t use it.

“Data is oil for this economy,” Armstrong said. “Oil can be used really well, and oil can be used really poorly.”

Armstrong also revealed behind-the-scene details of the Verizon deal earlier this year. Before Verizon bought AOL, Armstrong said his company was planning to raise $1 billion to $2 billion in funding. Instead a better offer from Verizon came knocking when he was talking to the service provider about investing. Verizon purchased AOL for $4.4 billion.

“There was no way you could turn down the Verizon offer for the future of where AOL,” Armstrong said. “We were going to be the largest media technology company. Now we want to be the largest mobile media technology company.”

Armstrong believes AOL’s brands — which in addition to TechCrunch include The Huffington Post and Engadget — are positioned to dominate the mobile space because many media companies have yet to make the transition online.

“If you’re a huge media company in the traditional space, and you haven’t made the shift to online, think about what the shift to mobile will look like,” Armstrong said.

*AOL owns TechCrunch, and Verizon owns AOL

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AOL CEO Tim Armstrong Defends Verizon’s Data Collection For Advertising