AOL's Advertising.com Buy Mostly Well-Received

  |  June 25, 2004   |  Comments

Reactions to AOL's plan to acquire Advertising.com win approval from industry players, with a few caveats.

Overall, industry figures approve of America Online's plan to acquire interactive marketing services firm Advertising.com for $435 million in cash, though some had a few caveats.

The deal, which put a halt to the smaller company's plans for an IPO, is somewhat reminiscent of Yahoo's acquisition of Overture. It pairs an online publishing company with a marketing services firm. AOL will be able to deploy Advertising.com's technology across its network and effectively sell inventory on other publishers' sites.

"The news is great," said Joe Germscheid, a media buyer with Zentropy Partners. "I'm excited about it. It's one of those 'if you can't beat 'em, buy 'em,' deals. It will be a great thing for the whole AOL group."

Germscheid said, "the main thing to be top of mind for AOL would be to learn from the past and not duplicate mistakes made with other acquisitions, meaning non-integration." This was his only concern about the deal.

The media buyer said he was concerned that AOL would keep the acquisition a separate entity and "not integrate it into AOL's larger position of power."

Germscheid was not the only industry player to mention the issue of integration. Another was Scott Howe, general manager of advertising technology and services firm aQuantive's DRIVEpm. The aQuantive property liaises between publishers and advertisers, competing with Advertising.com.

"It's probably a great move if -- and that's a big 'if' -- they can integrate both companies," said Howe.

"These are two great companies and I have a lot of respect for both, one as a partner and one as a competitor," said Howe. "It's hard to argue with the strategy. It seems like a smooth move. From AOL's perspective, it makes sense. Certainly, for how they are allocating inventory on their network, it might be a solution for them."

However, according to Howe, the devil is in the details, or rather, the integration. "As with any acquisition, they'll have to manage through issues of cultural fit and technology integration and all the things that make acquisitions more complicated in reality than on paper," he said.

Howe touched also mentioned potential conflict as a concern. "I think from an advertiser perspective I would be a little wary of sharing my data with someone who represents a huge publisher out in the space. And from a publisher perspective, I'd hate to think I'm selling my media to potentially one of my biggest competitors for share of advertising dollars. It could be a conflict, though that's not to say they don't have answers," Howe noted.

"Advertising.com's publishing customers are many that compete with AOL," said a consultant who formerly worked with AOL. So I don't see anyone else signing up to let AOL sell ad space for other properties. Whether it's in an indirect way or not, I don't see it happening."

Germscheid disagreed, saying, "I don't see that there is a conflict. It is like Yahoo buying Overture."

Regardless of whether or not there is a conflict, the bottom line is that AOL "has found a way to upgrade its ad serving technology and ad targeting capability," according to the consultant. "Instead of having to build it, they bought it."

Addressing the literal bottom line, Kevin Lee, CEO of search engine optimization firm Did-It.com, said, "The first thing that struck me about the deal is that because Advertising.com has so many advertisers in their system, it's an easy way for AOL and its parent Time Warner to monetize their content. They can grow Advertising.com that way, by maximizing their inventory."

Also, Lee said, "There are a lot of advertisers already in the Advertising.com network. There's a lot of assets AOL and Time Warner have, magazines along the lines of Sports Illustrated. There could potentially be some interesting synergies there."

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