AOL reportedly beat out Microsoft and is paying $275 million for Tacoda, the behavioral targeting company that serves ads to 125 million people across 4,000 Web sites. Tacoda will likely be operated as a separate unit, complementing Advertising.com, AOL’s highly successful direct response company.
Chairman Dave Morgan, who previously founded Real Media, launched the company in 2001 to provide local media companies with behavioral targeting analytics. Morgan’s vision was to prove that local media companies boasted strong behavioral characteristics that would offset lower traffic numbers.
As Internet advertising went on a major growth spurt a few years ago, however, Tacoda switched its focus to a broader network focus representing both brands and major publishers. Today, Morgan estimates that local publishers make up less than five percent of the company’s traffic.
Despite the company’s broader focus, Morgan says that the behavioral characteristics of local media audiences are so strong that they still tend to make up a much higher percentage of network buys. And they will continue growing.
“It is an important component,” he says. “You get people where they live….. among their interests… and services.” Specifically, Tacoda leverages local characteristics via its roster of vertical networks, which include autos, women, as well as movie and music audiences.
Morgan acknowledges that in recent years, some of the local publishers that began with Tacoda have been defecting from the company’s analytics to other providers, such as Omniture. But almost all of them still participate in the networks. “Behavioral is a lot of work,” he says. “We haven’t looked back.” Tacoda’s roster of local-oriented publishers includes Tribune, Cars.com, NBC Universal, CBS Digital Media, Advance, Belo, Morris, Media News Group and Media General.
It seems likely that Tacoda will be operated separately from AOL, alongside Advertising.com. But it could also be paired with Ad.com and spun off altogether – a potentially attractive option for Time Warner, AOL’s cash hungry owner.
Morgan says that there have actually been no discussions yet about how Tacoda will fit into the organization. There are also potential regulatory issues that could mar the deal as the government looks into privacy issues associated with the use of user “cookies” by Tacoda and other companies. But as a former government handicapper in DC….. I predict nothing will come from that.