AOL buys Tacoda to boost online ad offerings

IDG News Service - AOL LLC plans to strengthen its online advertising business by acquiring Tacoda Inc., a company that specializes in delivering ads based on users' online activities.

AOL entered into a definitive agreement to acquire Tacoda, whose "behavioral targeting" technology will complement AOL's online advertising services, the companies said today.

AOL and Tacoda didn't disclose details of the transaction, which will close after customary approvals are obtained.

AOL, which is owned by Time Warner Inc., is in a so far successful, years-long transition from a subscription-fee based business to an advertising-based business.

Like Google Inc., Yahoo Inc. and other major Internet players, AOL is busy boosting its capabilities to provide a variety of online advertising services, including search, video, syndicated, mobile and graphical ads.

To capitalize on the fast-growing online ad market, AOL, Yahoo, Google and others have resorted to purchasing online ad services companies.

For example, Google is in the process of buying DoubleClick for $3.1 billion, while Yahoo recently closed its acquisition of Right Media. In May, Microsoft announced its intention to buy digital marketing services provider aQuantive Inc. for $6 billion. Meanwhile, AOL acquired Third Screen Media and AdTech AG this year, and Lightningcast last year.

The U.S. online advertising market grew 35% in 2006 over 2005, the fourth straight year of expansion for this market, according to the Interactive Advertising Bureau. Marketers spent nearly $17 billion advertising on U.S. Web sites in 2006, the bureau said.

Tacoda, founded in 2001, is based in New York and will operate as a wholly owned subsidiary of AOL. It has about 100 employees and more than 4,000 Web sites in its ad network. Its publishing clients include The New York Times Co. and NBC Universal.