• by Mark Walsh  @markfwal, June 21, 2010

In its latest in a series of acquisitions, performance ad network Adknowledge has purchased cost-per-action network Hydra Group. The move expands the company's presence into the affiliate marketing segment and broadens inventory for its Bidsystem auction-based online marketplace. Terms of the deal were not disclosed.

Hydra distributes targeted offers on behalf of advertisers in search, email, Web display formats and social media through its affiliate network of publishers. The Beverly Hills, Calif.-based company says that last year it sent 233 million visits to advertisers' sites and generated 11.3 million new customers for marketers and brands including AT&T, life insurance company Argon, Hotwire and Sears.

In an effort to boost the quality of its network, Hydra in March cut the number of active publishers from 17,000 to less than 2,000 of its best-performing sites and changed admittance to the platform to an invitation-only basis.

Adknowledge CEO Scott Lynn said the quality and range of promotions were key factors driving the company's acquisition of Hydra. "The reason we were interested in Hydra is because we have thousands of advertisers across 1,200 categories, so we're excited about bringing more diversity in offers to affiliates than they've had in the past," he said.

Through its Bidsystem marketplace, 50,000 advertisers bid for traffic across Adknowledge's cost-per-click ad network covering various online ad categories, with social media the fastest-growing. Adknowledge in the last three years has made seven acquisitions, including social network ad company Lookery and social gaming ad network Super Rewards, aimed at widening the scope of its Bidsystem marketplace.

"Our strategy is pretty simple," said Lynn. "Sixty-five percent of ad dollars are spent with Google and Yahoo and the rest is split among 2,000 other companies. For small and mid-sized advertisers, that makes it very difficult to work with the rest of the ad market. "We're just trying to build a one-stop-shop for those advertisers to buy traffic across different distribution types."

With the Hydra deal, Adknowledge plans to make further inroads in the affiliate marketing industry as it has in other areas outside of search like email and social media advertising.

For its part, Hydra said the merger would help open up its network to a broader base of marketers. After driving new customers to clients like AARP and Kraft, and helping publishers monetize their sites by running its promotions, "we've built an incredibly healthy advertiser and affiliate marketplace that will increase in scale dramatically as we now join forces with Adknowledge," said Zac Brandenberg, chief executive officer of Hydra, in a statement.

Hydra will continue to operate in the near term as a separate brand alongside Adstation, Adknowledge's existing affiliate ad network. Brandenburg will continue to oversee Hydra operations within the combined company.

Adknowledge said Hydra affiliates would immediately gain direct access to the company's more than 6,500 offers using their current Hydra login, and following full integration of the two companies' systems, would be able to choose from 7,000 offers. Lynn said eventually all advertising will flow through the company's Bidsystem platform. Adknowledge expects to record more than $300 million in revenue this year.