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Posted by Shar VanBoskirk on January 18, 2007
This past Tuesday, AOL put in a 6.3 billion kronor (about $900 million) bid for Swedish ad network TradeDoubler. Although TradeDoubler's board voted to accept the bid, one of its largest share holders rejected the bid as undervalued. The take among the investment community is that this is AOL's attempt to expand advertising revenues now that it has moved away from its subscription-based business model. While I think this is certainly true, I find a few other angles of the potential acquisition more interesting:
1) Ad networks are back in a big way. In 2001, I wrote a piece predicting the demise of ad networks. And for the most part, I was dead on: Engage went belly up; DoubleClick ditched its media business. But now, 6 years later, new ad networks are springing up all over the place and veteran networks are offering expanded services. I think improvements in technology have made it possible for ad networks and media sites to help advertisers target ads based on more than demographics -- always the Achilles heel of the impression-based, online network buy. AOL's willingness to shell out some big bucks for TradeDoubler (it paid $435 million in 2004 for advertising.com, one of the largest ad networks in the US) indicates that it thinks ad networks will play a crucial role in the future of online advertising.
2. More and more, media properties are providing marketing services to help differentiate their overall offering from competitors. Yahoo!'s Panama ad management platform and MSN's AdCenter are tools that provide marketers an easy way to buy and manage ads on their sites (and eventually even on other online properties). They, like Google also provide a host of free marketer services (e.g. Keyword selection tools, Web analytics). This interest in TradeDoubler indicates AOL is also quite interested in growing its marketing services capabilities.
3. Why isn't AOL investing in social media? AOL has always served the mainstream consumer over the early adopter. But as a media company competing with other online portals for advertising dollars, I'm surprised that it is so willing to spend so much on more of what it already has. Granted this acquisition would provide a European presence. But I think at the end of the year, the most successful media companies will be the ones that provide advertisers diverse media options. We see MSN preparing for this through its acquisitions of additional marketing channels (Massive Inc), Google by developing advertising in other media (print, radio), and Yahoo! wishing they had done more with del.icio.us. AOL's interest in TradeDoubler seems very focused on staid online formats like display ads and affiliate marketing. A mistake I think, when the rest of the world is looking to alternative ways to create conversations with their customers online.