UPDATED: America Online
sent a strong signal about the health of the targeted online ad marketing sector on Thursday with a $435 million all-cash deal to acquire Baltimore-based Advertising.com.
The deal, AOL’s biggest acquisition since its merger with Time Warner, signals a trend among big media companies to buy into online marketing services in order to find new revenue opportunities on the Web. The acquisition mirrors Yahoo’s
acquisition of Overture and gives AOL a significant entry into the market for direct marketing and promotional campaigns on the Web, e-mail, and wireless platforms.
It effectively allows AOL, like Yahoo, to sell inventory on other
“The timing for this acquisition was very good. The advertising business has rebounded and is growing again. Advertising.com is growing on a strong
trajectory and we think this is a valuable deal for us,” AOL chief executive
Jonathan Miller said on a conference call with journalists.
“We intend to play big across the board in all the forms of Internet
advertising. This acquisition says that in no uncertain terms.”
Miller said AOL spent a lot of time on the financial aspect of the
transaction and described the $425 million price tag as “fair and
Miller also disclosed that AOL was an early investor in Advertising.com.
The media giant invested $5 million in 2000 as part of an early venture
capital funding round.
“Advertising.com will extend our advertising footprint on the Web, giving
us unparalleled reach, and allow us to serve our advertisers better with
more efficient campaigns,” AOL vice chairman Ted Leonsis.
Advertising.com powers an ad network that purchases inventory on an
impression basis and resells it to advertisers on either cost-per-action or
cost-per-click pricing. It connects marketers and ad agencies to hawk online
direct marketing and promotional services.
The company’s AdLearn technology is hailed throughout the industry
because it allows advertisers to keep a close watch on Web-based campaigns.
Advertising.com, launched in 1998, also offers services for campaign
reporting and analysis, electronic CRM (define) and brand measurement.
The transaction comes less than two months after Advertising.com filed
the paperwork to raise about $100 million in an IPO.
According to Advertising.com’s S-1 filing, the company generated $132
million in revenues in 2003 and earned $18.7 million. The revenues
represented a $74 million increase over the previous year’s takings.
Advertising.com CEO Scott Ferber said the decision to forego an IPO and
merge with AOL was a “a much bigger opportunity to get bigger, faster.”
“We were very fortunate to have had a choice to make. When we were
approached by AOL, our board had to decide whether to pursue the IPO or
whether to do the acquisition and it came down to how can we become bigger,
faster,” Ferber added.
Once the deal clears regulatory approval, Advertising.com will maintain
headquarters in Baltimore and will be reporting
to AOL Media Networks president Michael Kelly. Advertising.com has more than
300 employees in offices in the U.S., U.K., France, Germany, Norway, Sweden
The company competes with the likes of ValueClick and 24/7 Real Media in
the business of aggregating Web inventory and reselling to advertisers.