The Internet service provider said the all-cash deal will significantly boost its advertising network and asserts that the acquisition increases its Web ad viewing audience to about 140 million Internet users. Advertising.com, which focuses largely on delivery of so-called behaviourally targeted advertising, will also expand AOL's array of technologies used for creating and placing online commercials.
Advertising has been a sore spot for AOL, a division of media giant Time Warner, but the company has shown potential for making a comeback. In April, Time Warner reported that AOL's advertising revenue fell by 5 percent, or $12m, year over year, in its first quarter. However, compared with the previous quarter, the ad business rose 5 percent, powered mainly by gains in commercial search revenue and fuelled by a partnership with Google. AOL's advertising revenue declined by a stunning 40 percent in 2003.
Executives at AOL pointed to the acquisition as proof that AOL is serious about improving its ad prospects. Jonathan Miller, chief executive at AOL, highlighted recent growth in the online ad industry as evidence that the company can turn the situation around.
"This acquisition is a strategic move that will bolster AOL's advertising business, building on the strides made in the past year," Miller said in a statement.
Advertising.com asserts that it operates a third-party advertising network that reaches more than 110 million people each month, and more than 70 percent of all US Web users. The company buys ad inventory from Web sites, search engines and email publishers and uses its proprietary AdLearn technology to sort and place ads based on its advertisers' goals. The company's revenue increased nearly 80 percent in 2003 to reach $132m.
One of the more attractive elements of the Advertising.com acquisition is AOL's ability to increase its prospects for selling behavioural ads. Under the strategy, Advertising.com uses visitor data from Web sites in conjunction with various tracking technologies to profile surfers as they jump from one site to the next. The company creates a composite of visitors' demographics, behaviours and interests, but without using identifiable data about specific people. That data is then used to tailor ad campaigns.
While effective, the practice, also known as contextual advertising, has caused concern among privacy advocates who worry that the strategy opens Internet users up to increased scrutiny of their personal Web surfing habits. In one case, Advertising.com rival DoubleClick nixed plans to track and profile consumers after the Federal Trade Commission and privacy advocates scrutinised the strategy, which called for the merging of personal information from DoubleClick's catalogue business with data about Web-surfing behaviour from the company's ad network. Other companies that practice behavioural ad tactics include Revenue Science, Tacoda and aQuantive.
