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AOL’s Tacoda To Terminate Inventory Contracts With Publishers; Clarizio: ‘Expanding, Not Shuttering’

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imageAOL (NYSE: TWX) behavioral targeting unit Tacoda will terminate the existing inventory contracts with web publishers within 30 days, the company said in an e-mail to clients last week. The e-mail, obtained by VentureBeat, has the words “transition update” at the top and says that this action is related to Tacoda’s integration into Platform-A, the umbrella company for AOL’s network of online ad services.

Expanding, not shutting: I spoke with Lynda Clarizio, president of Platform-A, about the latest developments on Tacoda’s integration into Platform-A as she was heading home on a train Saturday afternoon. She took issue with a number of points in the VentureBeat piece, insisting that the decision to end Tacoda’s contracts with publishers was necessary because Platform-A and Tacoda had been purchasing inventory from the same third party sites. Since the two are being integrated — and considering that has a larger reach — it didn’t make sense to have two sets of contracts. Also, she said that Tacoda wasn’t merely being aligned with Platform-A’s Advertising. She adds that this is “an expansion; Tacoda is not being shut down. But we heard from many of Tacoda’s clients, because of the relatively small network it had, that it wasn’t a very scalable solution on its own.”

No difference on pricing: VentureBeat said that Tacoda’s automated system tended to pay higher CPMs ranging from $2 to $6, with speculation that AOL wants to bring that generosity more in line with its lower CPM display business through Clarizio emphatically denied that was the case, saying that was targeting behavioral ads at exactly the same rate that Tacoda was. One source presented this view to me earlier today when asked about AOL’s decision: “Given the fact that publishers must take all [] ads to get any behavioral targeting/Tacoda ads — with selling all the ads — it sounds like AOL has abandoned a large, fast-growing and very profitable market all in the name of functional alignment with a slower growing legacy business.” To be sure, Clarizio would have none of it. “Yes, everything is being run through the server, which is why we needed to terminate those previous contracts because we’ve integrated everything under one P&L. But the targeting technology that is being used is Tacoda’s system.”

The Tacoda tension: AOL bought Tacoda last summer for $275 million. Back in September, AOL formed Platform-A to house and align those new additions. Unlike the others, the integration within Platform-A has proved difficult for Tacoda, as nearly all of its senior executives were ousted or quit by this past spring. Two sources I spoke with today said that when Tacoda was brought into AOL, the unit had 97 employees. It now has about 35, following a mix of departures and dismissals. And despite a recent promotion, one source said that, Tacoda vet Hugh McGoran left the unit in July to take a job as SVP at contextual ad firm Peer39 (Daniel Jaye, another former Tacoda exec is on that company’s board.)

Clarizio wasn’t able to say for certain how many Tacoda employees have come and gone since the purchase, or how many have quit or been laid off. However, she did concede that many of those on Tacoda’s ad sales team were not happy about being integrated into the single Platform-A sales force. “All I can is that there were some people who left, there were some we asked to leave. But we have the entire Tacoda engineering team, which is based in Fort Washington, PA, and they are the key to Tacoda’s product.”

2 Responses to “AOL’s Tacoda To Terminate Inventory Contracts With Publishers; Clarizio: ‘Expanding, Not Shuttering’”

  1. Henry Spitzer

    Well, here's another $275M AOL Genius management has flushed down the sh#*tter. Every week that goes by gives more evidence Clarizio, Grant and Falco are clueless. Is there ANY doubt that Bewkes is still blind with rage over the inane AOL-TW merger of 2000? His Henny Youngman's "Take my wife….PLEASE" version with AOL is another example of throwing out the baby with the bath water. Bewkes will probably pay Earthlink to take the dial-up business and whatever deal they make for the rest of AOL will look like the deals the banks have been making to unload their bad mortgage paper….25 cents on the dollar. How much was AOL valued at the time of the merger compared to the sub $10B they HOPE to get today? Can anyone total up the the combined losses of shareholder value due to T-W incompetent management since 2000? How much did they write off/down, pay in SEC fines? How about all the businesses they have bought and TANKED…such as Netscape (remember when they had 80% of the browser market?), and recently Third Screen, Tacoda, Userplane, Bebo….their corporate failure list reads like the rap sheet of a career criminal!

  2. There is no one left at AOL who understands anything about TACODA's business. Nearly all TACODA people have been fired or bought out. Clarizio, Grant and Falco have essentially killed the business.