NEW YORK (AdAge.com) -- America Online, a unit of Time Warner, has agreed to acquire advertising network Advertising.com for $435 million in an all-cash transaction. The deal is expected to close this summer.
Advertising.com acquires ad inventory from Web sites, search engines and e-mail publishers and segments and allocates the inventory based on its advertisers' objectives. Advertising.com said it works with more than 800 advertisers and 1,500 online publishers.
Jonathan Miller, CEO of AOL, said in a conference call today that combining its network with Advertising.com's will enable AOL to expand its advertising base, reaching more than 140 million Internet users, and tap into Advertising.com's pay-per-performance advertising.
Advertising across the Web is a new direction for AOL, which has typically focused only on its own properties. The deal allows AOL to better monetize its ad inventory by using the pay-per-performance model, according to a statement. AOL had generally used a cost-per-thousand viewers model for ad rates.
Pay-per-performance is a model in which the advertiser pays when an action occurs, such as when a customer performs a transaction.
Mr. Miller said AOL would benefit "from incremental revenues of Advertising.com and through the ability to maximize to a very great extent the value of our existing inventory through our network."
Optimism at AOL
"The acquisition is a testament to how serious we are at seeing our advertising grow," said Ruth Sarfaty, an AOL spokeswoman. "We've had two healthy quarters in a row [in online advertising] so there's great optimism around our advertising."
Advertising.com is profitable, according to a company statement. The network, which had revenues of $132 million last year, filed for an initial public offering in April. Why get acquired now? "It came down to a decision, How can we become bigger faster?" said Scott Ferber, CEO of Advertising.com. "Being part of the biggest media company in the world is the way to get bigger faster."
The network will remain in Baltimore, where it is based, and be managed as a separate company. It has more than 300 employees.
AOL, beleaguered by the popularity of broadband and a decline in its membership rolls, in May announced an online campaign to promote its premium services to consumers who already have broadband. AOL does not offer broadband services.
In the last two years, AOL has "rebuilt" its advertising business, Mr. Miller said, consolidating sales, sales development, client service, inventory management, search and commerce into one unit under Mike Kelly, president of AOL Media Network.
AOL's advertising revenue grew from $204 million in the fourth quarter of 2003 to $214 in the first quarter of 2004. AOL's total ad revenue for 2003 was $787 million.