Investors and analysts punished AOL L.L.C. for being late to the party when it scrapped its subscription model last year in favor of online advertising. When it comes to mobile, though, the Time Warner subsidiary may arrive in the nick of time.
The Dulles, Va.-based company continued its spending spree last week, shelling out a reported $275 million to acquire online advertising firm Tacoda. The deal follows several recent AOL acquisitions including Adtech, a German developer that helps Internet publishers manage their ad inventories, and online video advertising company Lightningcast. And it comes on the heels of AOL’s aggressive move into wireless advertising, its May tie-up with Third Screen Media.
Tacoda is a New York-based advertising network that monitors consumers’ online behavior. The company compiles granular information such as which Web sites users visit, and what their interests are based on which advertising links they click on. Tacoda effectively creates profiles in an effort to allow advertisers to deliver highly targeted marketing messages on appropriate Internet destinations.
“Tacoda does behavioral targeting; they track (behavior) using cookies on the Internet,” said Jeff Janer, Third Screen’s CMO. “They can say, ‘Here’s somebody who has researched a lot of automotive sites, then he goes to ESPN. So let’s show him an ad for an auto.'”
Mobile challenges
Such highly detailed information is usually impossible to acquire in wireless, of course, as most handsets don’t support cookies. Instead, consulting firms are conducting market polling to determine the kinds of users that are drawn to specific Web sites. And some mobile advertising start-ups are deploying technology that can identify the type of handset being used and create a profile for that specific phone, recognizing the phone every time it accesses the Web site of a publisher in the advertising firm’s network.
Such offerings can be astoundingly complex, using 200 criteria or more to single out a handset. But even that technology is inferior to being able to track individual users, Janer said.
“I don’t think handset detection is good enough,” he opined. “The iPhone is just getting people interested; more people are starting to browse the mobile Internet. With the native HTML browsers gaining more traction, that will further enable cookies to become more prevalent.”
Deep waters
Such progress will give Third Screen an opportunity to leverage technology from Tacoda and its other sister companies. But while AOL appears well-armed as it comes to the mobile advertising battlefield, it will lock horns against its bigger-and richer-Internet rivals, all of whom have invested jaw-dropping sums in online advertising. Microsoft Corp. earlier this year said it will spend a whopping $6 billion to acquire Internet advertising firm aQuantive, and Google Inc. is spending about half that amount on DoubleClick, which has already dipped its toe in the mobile waters.
Yahoo Inc. and Publicis, a French advertising company, have made similar-if less expensive-acquisitions. Such investments are sure to make waves in mobile as the lines continue to blur between the wireless Web and the fixedline Internet.
Carriers remain key
For now, though, the lack of granular data about wireless Web usage presents an opportunity for service providers, according to Janer. Operators are compiling information about their mobile Internet users and trying to figure out how to monetize it without alarming their customers. Until third-party developers find better ways to monitor traffic-or until cookies become a more viable option-carriers will be the key to delivering targeted ads to on-the-go surfers.
“The carriers have a lot of work to do on the back end,” Janer claimed. “They can take the data, ‘anonymize’ it and work through the legal rulings and interpretations (of privacy regulations). That’s why they’re still key to the value chain. They do have this information. If they can make it available, they will be able to charge a premium for it.”
