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

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 Advertising.com 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 Advertising.com. Clarizio emphatically denied that was the case, saying that Ad.com 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 [Advertising.com] ads to get any behavioral targeting/Tacoda ads — with Ad.com 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 Advertising.com 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.”

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