• by Joe Mandese  @mp_joemandese, September 5, 2007

Just months after Time Warner's AOL unit agreed to acquire behavioral marketing firm Tacoda for an estimated $275 million, Yahoo late Tuesday announced a deal to acquire rival BlueLithium for about $300 million in cash.

The deals are part of a broader surge in mergers and acquisitions involving high profile Internet advertising services firms that began early this year with Publicis' acquisition of Digitas, and the proposed acquisitions of DoubleClick by Google and aQuantive by Microsoft, but also signals the increasing value of the new field of behavioral targeting services that some observers expect to begin impacting offline media like interactive television.

According to the most recent estimates from online industry stats keeper eMarketer, the behavioral targeting market is set to increase to $3.8 billion by 2011, from $350 million in 2006.

The other major players in the behavioral targeting industry include Revenue Science, AlmondNet, and Undertone Networks, but many publishers maintain their own behavioral targeting systems.

The expansion of behavioral targeting services is significant for the overall advertising industry and could begin to impact the use and perception of offline marketing, because it alters the traditional model of delivering ads to people based on the context of the content that is adjacent to their advertising message. In fact, ads served via behavioral targeting may not appear relevant to the content on a Web page, but are based on visits consumers have made to other relevant sites. The practice effectively disassociates advertising messages from media content, and bases them purely on consumer behavior.

In theory, that same approach could be applied to television, or other electronic media as systems are developed that can track user behavior and serve ads to people based on their behavior.

The practice is liked by publishers because it creates greater value for inventory that otherwise might not seem relevant to an advertiser. A car company ad, for example, might be served to a person visiting a seemingly irrelevant, and ostensibly lower-demand Web site, based on the fact that the consumer had previously been visiting automotive related sites.

In Tuesday's announcement, Yahoo CEO Jerry Yang said BlueLithium's products, technology and team will become "an integral part of our drive to build the industry's leading advertising and publishing network." He specifically cited BlueLithium's ability to service "performance-based display advertisers and enhance the value of our publishers' inventory."

According to comScore Media Metrix, BlueLithium is the fifth largest ad network in the U.S. and second largest in the U.K. with 145 million unique visitors each month.

BlueLithium will become a wholly-owned subsidiary of Yahoo!. CEO Gurbaksh Chahal will remain with BlueLithium for an interim period through the integration. The transaction is subject to customary closing conditions, including regulatory approval. It is expected the transaction will be completed in the fourth quarter of 2007.

'07 Digital Advertising M&A Deals Top $12 Billion
Acquisition	Buyer	Date	Value
Digitas	Publicis	January	$1.3 billion
Adscape	Google	February	$23 million
Reprise Media	Interpublic	April	Undisclosed
DoubleClick	Google	April	$3.1 billion
Right Media	Yahoo	April	$680 million
24/7 Real Media	WPP	May	$649 million
aQuantive	Microsoft	May	$6.0 billion
TACODA	AOL	July	$275 million
BlueLithium	Yahoo	September	$300 million
Total			$12.327 billion-plus

Source: Compiled by Online Media Daily.