• by Tameka Kee , March 17, 2008

While Time Warner may have put AOL on the buyer's block, with its stable of ad networks--including ThirdScreenMedia for mobile, Lightningcast for video, and Tacoda for behavioral and the original Advertising.com--AOL seems well-equipped to battle giants like Microsoft, Google and Yahoo for a major share of the online advertising pie.

AOL's third-party ad networks brought in about $650 million in revenues in 2007, or about 27% of the Web giant's advertising and content revenues, according to the new "Online Ad Networks: Monetizing the Long Tail" report from DeSilva + Phillips.

That's up 55% from the less than $100 million in off-network revenues in 2002--a sure sign that AOL's slow shift from being a walled-garden portal to full-fledged digital marketing juggernaut is gaining momentum.

Indeed, the $2 billion worth of "pure play" ad network M&A activity in 2007 (not including 24/7 Real Media, aQuantive or DoubleClick--as the networks only made up a fraction of the parent company's revenues) allows all of the major players "to make multiple bets on the future direction of online advertising," according to the report.

Since few online publishers--from niche players like enthusiast sites and blogs, to major outlets like CNET or CNN--can monetize all of their inventory at the highest rate, ad networks have come to represent a necessary evil--albeit one that's cost-effective and can reduce the headache of maintaining a full-fledged sales force. For advertisers, networks deliver the ability to snag a smorgasbord of inventory all at once--bundling the targetability of cheaper, long-tail sites with the reach of pricier portals and everything in between.

This value proposition has sparked continuous investment frenzy--one that has already topped $250 million in the first quarter of 2008, including the $85 million in capital Glam Media received, and the $50 million for widget-based Slide. And AOL's foresight has seemingly pushed it into a leadership position when it comes to offering advertisers the full breadth of digital inventory--that is, if new head of advertising sales Lynda Clarizio can get the Platform A ship sailing in the right direction.