In an ongoing effort to shift from its roots as an Internet service provider to an advertising-based business model, AOL announced Monday that it will purchase a European online advertising firm for $900 million.
The acquisition of TradeDoubler in Stockholm, Sweden, will help Dulles-based AOL grow its overseas business and become a player in the online advertising arena, said Jeff Bewkes, president and chief operating officer of Time Warner, AOL’s parent company.
The acquisition would specifically strengthen AOL’s position in Europe’s online market and bolster the services provided by Advertising.com, acquired in 2004.
“This is a complementary purchase, and I would imagine that they would probably merge those assets into a single, pan-European ad network,” said Greg Sterling, an analyst at Sterling Market Intelligence in Oakland, Calif.
The announcement comes in the wake of thousands of layoffs at AOL, including about 450 in the Washington region. The company — which has struggled to compete with firms such as Yahoo! and Google that offer free e-mail accounts supported by an advertising-based business model — said the layoffs were part of cost-cutting measures that would save more than $1billion by the end of 2007.
Along with last year’s layoffs, AOL announced major changes in the company’s strategy, including dumping its subscription-based e-mail accounts for broadband users and selling off its European Internet access businesses.
Both strategies were aimed at refocusing AOL’s revenue streams. Following the announcement, AOL lost about 2.5 million subscribers.
AOL has since sold both its France- and U.K.-based units to European companies and is in the midst of closing a deal on its German Internet provider.
Today the company is focused on advertising revenue at home and abroad.
Its subsidiary, www.advertising.com, a Web site that sells advertising to thousands of Web sites, has brought in new sources of revenue since it was purchased in 2004.
AOL lost 13 percent, or $210 million, in subscription revenues in the third quarter, according to Time Warner, but increased advertising revenues by 46 percent, or $151 million, in the same quarter.
Overall, the company’s revenue decreased 3 percent in revenue from the previous year’s third quarter.
Bloomberg contributed to this report.
