AOL says market for online ad deals heats up

By Kenneth Li

NEW YORK (Reuters) - The chief executive of Time Warner Inc.'s (TWX.N: Quote, Profile, Research, Stock Buzz) AOL unit said on Wednesday the acquisition market for online advertising technology is heating up, and AOL is interested in companies with expertise in targeting consumer behavior.

AOL, which said Wednesday it bought Germany-based ad serving firm Adtech Co., has been on a tear to fill missing parts of its online advertising business after a strategy overhaul last year to focus on ad revenue instead of subscriptions.

"There is clearly a race going on," AOL Chairman and CEO Randy Falco said of the deal-making frenzy in the online ad market.

"This business is more and more about ad serving technologies. I felt that we have to be in every space we could possibly be in," he told the Reuters Global Technology, Media and Telecoms Summit in New York

Ad firms with contextual-targeting technologies, which match ads to the content of a Web page a user visits, and behavioral-targeting technologies, which match ads to a user's actions, are among AOL's top targets.

"That's the next big growth spurt," Falco said.

Falco did not identify companies that AOL was seeking.

Quigo Technologies, which specializes in contextual ads; Tacoda, which targets ads to consumer behavior; and Exponential Interactive Inc. have attracted attention, said Stan Sandberg, a principal at New York-based boutique investment bank Gridley & Co. LLC.

"It is about making a relevant ad more effective as the ad dollars are shifting," Sandberg said.

Falco said AOL would not likely pay big premiums to fend off rivals.

In April, Google Inc. (GOOG.O: Quote, Profile, Research, Stock Buzz) said it struck a deal to buy DoubleClick Inc. for $3.1 billion, igniting speculation of deals for other publicly traded online ad companies, including aQuantive Inc. AQNT.O, ValueClick Inc. (VCLK.O: Quote, Profile, Research, Stock Buzz) and 24/7 Real Media Inc. TFSM.O

Google's deal was quickly followed by a string of other purchases. Yahoo Inc. (YHOO.O: Quote, Profile, Research, Stock Buzz) said in late April it will buy the rest of Right Media Inc. for about $680 million. Yahoo took a 20 percent stake last October in privately held Right Media.

"We'll be constantly looking in that space," Falco said.