AOL Buys Online Ad Firm Tacoda

Ratcheting up competition in the online marketing space, AOL is buying behavioral targeting ad firm Tacoda for an undisclosed amount.

Competition in the online advertising arena continues to heat up, as AOL announces plans to acquire online advertising firm Tacoda for an undisclosed amount. Tacoda delivers advertisements to Internet users based on behavorial targetting, enabling advertisers to push their messages to specific types of Internet users based on data like the types of Internet sites they visit. Behavior-based marketing was recently estimated to account for $350 million in advertising spending in 2006; tracking firm eMarketer says it may be worth $3.8 billion by 2011.

“The acquisition of Tacoda will build on our advertising momentum, letting us better serve advertisers by enhancing our ability to precisely target advertisements across an even broader network,” said Ron Grant, AOL President and COO, in a release. “We are committed to bringing advertisers and publishers a full range of tools and services, along with the widest reach, and with Tacoda we’re taking another step toward that goal.”

The move is the latest in a series of acquisitions as large Internet companies snap up online advertising firms in a bid to increase their competitiveness in the fast-growing online ad world. Although the reported $260 to $300 million AOL is paying for Tacoda is comparatively small compared to Google’s pending $3.1 billion acquisition of DoubleClick or Microsoft’s $6 billion buy of ad firm aQuantive (both announced earlier this year) the move highlights the fact that most Internet companies don’t make money from their users, but from advertisers…and so when push comes to shove, the concerns of those advertisers may outweigh the concerns—or privacy—of their users.