AOL today announced it bought online behavioral targeting advertising network Tacoda for an undisclosed sum.

Tacoda makes software that serves ads based on consumers' online behaviors. AOL AOL President and COO Ron Grant said in a statement the buy will improve AOL's ability to "precisely target" ads to consumers on behalf of advertisers and publishers.

The Internet service provider will also use the Tacoda technology to extend the reach of its third-party display network.

AOL began transforming from an ISP to a free ad-supported Web portal a year ago and has improved its chanes for success with a few strategic purchases.

In the first half of 2007, AOL nabbed Third Screen Media, a mobile advertising network and software provider, and AdTech AG, an international online ad-serving company based in Frankfurt, Germany.

With the Tacoda buy, AOL enters a growing behavioral targeting market that could hit $3.8 billion by 2011, from $350 million in 2006, according to a June 2007 eMarketer report from senior analyst David Hallerman.

Hallerman said behavioral targeting helps advertisers reach a more engaged audience with fewer ad impressions, and lets publishers monetize their remaining. Meanwhile, he said welcome targeted ads because they tend to be more relevant to their needs.

AOL isn't the only company aware of the behavioral targeting opportunity. In May, internetnews.com reported Yahoo would announce SmartAds, a new ad delivery platform powered by behavioral, demographic and geographic targeting.

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That news became official in early July.

Hallerman's report also suggests that Google purchased DoubleClick earlier this year to enhance its behavioral targeting technology, too.

AOL said Tacoda, which is based in New York and employs approximately 100 people, will operate as a wholly owned subsidiary of AOL. AOL did not specify an expected closing date for the buy.