Tacoda Buy Could Bolster AOL's Relevance in Web Ad Arena

  |  July 24, 2007   |  Comments

AOL agreed to purchase the behavioral targeting technology outfit and its rich warehouse of online user behavioral data. A source familiar with the deal pegged the price at $275 million.

Following its recent purchases of an ad management firm and a mobile ad network, AOL's agreement to acquire behavioral targeting firm Tacoda serves as another indication that the once-tired ISP is a relevant competitor in the online media and ad space. For Tacoda, AOL's giant ad network, Advertising.com, should expand reach for behavioral advertisers. AOL meanwhile gets one of the best known and most experienced behavioral targeting technology outfits and its rich warehouse of online user behavioral data.

"With the growth of [Web] usage and fragmentation of audiences in general...big advertisers, and frankly, publishers are valuing working with big scale partners," said Mike Kelly, President of AOL Media Networks. He stressed the AOL portal's status in the display ad arena, where Yahoo, and lately Google, typically are believed to dominate.

"What was critical was [AOL and Tacoda] had a shared vision of where the thing needed to go," said Tacoda CEO Curt Viebranz. "We had the assurance they'd do with us what they did with Ad.com, which was effectively leave it alone and let it grow." Viebranz, who took over the chief exec role at Tacoda last year, worked as a media executive for AOL parent Time Warner for 17 years.

Tacoda had been working with several investors, mulling over IPO or selling possibilities, and two strategic investors including AOL had shown an interest in acquiring the firm. According to sources familiar with the deal, Tacoda was sold for $275 million.

"We think scale matters and this allows us to get to scale a lot faster," said Viebranz of the pair-up. Behavioral targeting technologies serve ads to particular users within a relatively narrow time frame, such as over a few weeks or months when they've shown interest in buying a car by visiting auto sites. So, the larger the site network, the greater the chance of reaching a user within that tight time frame.

In 2005, Tacoda launched a behavioral network, recognizing advertisers want reach, and has since phased out its site-side offering to focus on the growing network. The network currently includes 4,000 sites reaching 120 million unique visitors monthly, up from about 49 million at launch, according to Tacoda.

AOL will operate Tacoda's Audience Network separately from its Advertising.com network, said Kelly. He would not offer details on plans for integrating Tacoda's behavioral technology with Advertising.com, which already offers behavioral targeting. "We will see [Tacoda] as a preferred partner for behavioral targeting...and it will help us make more money with AOL," said Kelly.

AOL also plans on enhancing its offerings through recent purchases of ad management company AdTech and mobile ad network Third Screen Media. Last year, AOL bought video ad platform Lightningcast to build out Advertising.com's video ad capabilities.

"AOL is really doing a masterful job of reinventing themselves....They're equipping themselves well," said Jarvis Coffin, CEO of Burst Media, which provides ad management services to Tacoda. Tacoda this month renewed its contract with Burst; those involved with the AOL deal don't believe the relationship will be affected by the AOL buy.

The recent surge in ad technology acquisitions has been spurred partially by ripeness of the market; however some believe data are at the heart of deals such as Google's DoubleClick buy, Microsoft's aQuantive buy, WPP's 24/7 Real Media buy and Yahoo's Right Media buy.

"It’s a data-driven business," said Kelly. "The better data you have...the more value you'll bring to advertisers, and the higher revenue per page you're going to generate for publishers."

The Tacoda acquisition is subject to regulatory approval. Despite a heightened interest in online ad technology deals by The Federal Trade Commission and Congress due to privacy concerns, Tacoda's Viebranz expects the deal to pass inspection. "We have always taken a very principled and firm approach to privacy," he said.
Tacoda founder and Chairman Dave Morgan has been a regular on Capitol Hill as a representative of the Interactive Advertising Bureau touting the industry's dedication to protecting user privacy.

Operating as a wholly owned subsidiary of AOL, Tacoda's 100 staffers will remain at the company's own location, which is expected to move soon to a new spot in its current west side neighborhood of New York City.

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Kate Kaye

Kate Kaye was Managing Editor at ClickZ News until October 2012. As a daily reporter and editor for the original news source, she covered beats including digital political campaigns and government regulation of the online ad industry. Kate is the author of Campaign '08: A Turning Point for Digital Media, the only book focused on the paid digital media efforts of the 2008 presidential campaigns. Kate created ClickZ's Politics & Advocacy section, and is the primary contributor to the one-of-a-kind section. She began reporting on the interactive ad industry in 1999 and has spoken at several events and in interviews for television, radio, print, and digital media outlets. You can follow Kate on Twitter at @LowbrowKate.

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