AOL’s Randy Falco Loves Cookies; Paying $200-300M for Tacoda – What It All Means
At least we are off the ad serving thing…
The New York Post landed the next acquisition story: Time Warner’s AOL is buying the behavioral targeting firm Tacoda for $200 - $300 million.
I want to know what part of this payout is a premium for the omnipresent, embodiment of behavioral targeting, mr. publicity, conference rat and man-in-charge Dave Morgan. Heck, I don’t even know the name of the guy who runs Revenue Science. And I could not even remember the name of AlmondNet (AlmondNut, AlmondNut…) for a few minutes.
Seriously, the Tacoda deal will help solidify AOL’s Advertising.com’s domination in behavioral targeting and performance based display ads. Advertising.com has the largest reach of any ad network and works with 3,000 publishers and all the large direct response advertisers. Let’s see what folks report re valuation multiples since this one seems closer to a 24/7 multiple than a RightMedia or aQuantive multiple. It looks like AOL made a great deal.
Tacoda’s cookie-dropping program (where publishers drop cookies on users without serving banner ads at all) allows Advertising.com to engage with certain publishers that might be unwilling to sell them inventory at reduced and uncertain remnant rates. It is also a great hedge since many of Advertising.com’s largest remnant advertising partners are coming into possibly unfriendly or at least “Frenemy” spheres of influence—notably that Google and Fox Interactive Media have their own designs for MySpace inventory; Microsoft has first dibs on Facebook and Yahoo! will be diverting traffic to RightMedia.
This deal follows in the wake of the big four—Google buying DoubleClick, Yahoo! buying RightMedia, Microsoft buying aQuantive and WPP buying 24/7.
What does all this mean?
1. Stop Ignoring the Long Tail
None of the now five deals (AOL/Tacoda; YHOO/RightMedia; GOOG/DCLK; MSFT/aQuantive; WPP/24-7) include the Long Tail.
We know all the customers are moving to the Long Tail and we know advertisers pay all of us to reach their customers, so what’s the story? According to Technorati, there are over 70 million blogs at last count. Google, via its Adsense program, is the sole player in the Long Tail with distribution on between 250,000 and 1,000,000 sites (depending on who you believe).
In contrast:
- Tacoda: 4,000 sites
- RightMedia (Yahoo!): 1,000 sites (plus 60 ad networks)
- 24/7 Real Media (WPP): 950 sites
- DrivePM (aQuantive/Microsoft): 250 sites
- DoubleClick (Google): 1,000 sites (ad serving, not media)
2. Consolidation will continue
This is the beginning. The big four (Microsoft, Yahoo!, Time Warner AOL, Google) will continue to be busy. And don’t forget our friend Rupert over at Newcorp Fox Interactive Media and any number of private equity guys.
There are too many ad networks (200+ at last count). Without technology and a unique selling proposition (sorry, could not resist), these guys are going to be taken out at low multiple, marginalized or go the way of the dodo bird.
3. Premium vs. Remnant
There are two sides of the track, as they say. RightMedia and 24/7’s ad network business are clearly built to monetize remnant (Yahoo’s Susan Decker calls it “non-premium” on their earnings calls but let’s call a spade a spade—a lot of this is the dark underbelly).
DoubleClick does not have a media business (it had one in the late 90s run by none other than ex-Yahoo!’s sales head Wenda Millard but made the mistake of listening to advice from Wall Street and sent the media guys packing). DoubleClick does run ad serving for the largest, biggest publishers on the internet (AOL’s ad server was built by DoubleClick (in part by ContextWeb’s CTO John Pavley when he was at DoubleClick) so it is kind of funny they are the only company that did not buy an ad server). DrivePM, the aQuantive ad network, is the smallest division of aQuantive. It pulls remnant from top comScore sites and is known for its expertise in performance based media.
Tacoda is an interesting hybrid since AOL’s Advertising.com will be able to use its cookies dropping program to appeal to and derive value from large premium publishers without serving banner ads. It can drop cookies on premium inventory without paying premium rates and re-target those users on remnant inventory already in its network.
Still, there is not a straight premium play in the group.
Related Links: NY Post, VentureBeat, Business Wire, TechCrunch, Union Square Ventures, Silicon Alley Insider, DealBook, PaidContent.Org, SearchEngineLand, Jim Kukral, HipMojo
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