• by Mark Walsh  @markfwal, May 18, 2010

Looking to take on the likes of Demand Media and AOL's Seed initiative, Yahoo announced Tuesday it had agreed to acquire user-generated publishing service Associated Content. Terms of the deal were not disclosed, but reports estimated the purchase price at $90 million.

Started in 2004, Associated Content has emerged as one of the leading social news services, with 380,000 freelance contributors and a supply of more than 2 million articles, photos, videos and audio files. It also boasts a monthly audience of 16 million unique visitors, according to comScore.

Associated Content competes with other so-called content farms like Demand, perhaps the largest player in the space, with 56 million monthly visitors, and AOL's recently launched Seed unit led by former New York Times tech reporter Saul Hansell. The general idea behind these ventures is to assign stories automatically to freelancers based on user interests and target ads accordingly.

Yahoo said buying Associated Content would help the Web portal better tailor content to its global audience of more than 600 million users.

"Combining our world-class editorial team with Associated Content's makes this a game-changer," said Yahoo CEO Carol Bartz in a statement. "Together, we'll create more content around what we know our users care about, and open up new and creative avenues for advertisers to engage with consumers across our network."

After restructuring over the last year and a half, Bartz said in the company's fourth-quarter conference call in January that Yahoo would look to make acquisitions in three categories: small to medium deals for technology and talent; content plays to gain new audiences and communities; and acquisitions to enter new geographic markets.

The Associated Content deal would seem to fall into the second category, allowing it to offer users an array of niche content under broader headings like news, sports, arts and entertainment and business and finance. Yahoo recently kicked off a new branding campaign highlighting its own properties as well as those of partners like Facebook and Twitter. Its initial $100 million rebranding effort, launched last year, failed to boost traffic to the Yahoo home page.

For marketers, Yahoo promised the deal would lead to more targeted advertising options. "The combination promises to offer advertisers even more opportunities to engage groups of passionate consumers in ways they will find uniquely appealing to their interests and tastes," read the Yahoo statement Tuesday.

The company also said it would use data gleaned from its search services to identify story topics for Associated Content and would incorporate the company's content into its existing properties.

For its part, Associated Content welcomed the chance to have a broader platform to build out its offerings. "Combining our crowd sourced content with Yahoo's distribution, world class editorial team and online marketing leadership will accelerate our growth as we continue to leverage our best-of-breed platform to deliver high quality compelling content on more than 60,000 topics," said company founder Luke Beatty, in the same statement.

The Wall Street Journal's BoomTown blog cited sources saying the company was on track to post revenue of $15 million this year, up from $4 million in 2009.

The Associated Content acquisition could also heighten interest in a rumored IPO for Demand Media, which last month reportedly hired Goldman Sachs to look into such a possibility. Demand has already managed to grab talent from Yahoo, with former U.S. sales chief Joanna Bradford and other executives recently leaving to join the company.