Latest AOL buy spells more ad rivalry with Microsoft

In the same week that Microsoft made a half-billion-dollar deal with Viacom, AOL has announced it's closed a merger deal in the advertising space. Could greater intrusiveness into consumer behavior, and higher ad prices, ultimately follow?

Long ago, it seems AOL was known as an Internet service provider, while Microsoft was considered a software vendor. But AOL's announcement this week of its completed buyout of Trigo, together with Microsoft's $500 million-plus pact with Viacom, signify ever intensifying rivalry between the two budding advertising and entertainment empires.

Unlike Microsoft, which attached a base value of $500 million to its Viacom agreement, AOL has disclosed no details at all about how much it shelled out to purchase Quigo, a specialist in a technology known as contextual advertising which matches ads to Web page content.

Clearly, however, the ever expanding AOL entity is on a major spending roll in the ad arena as the pages in the calendar turn increasingly closer to 2008.

Earlier this year, AOL made three other acquisitions in the ad space: Tacoda, a specialist in behavioral targeting technology; Third Screen Media, a player in mobile advertising; and Adtech, an ad serving platform based in Germany.

Trying its best not to get outdone, Microsoft has also included a couple of advertising planks in its partnership agreement with Viacom, including use of Microsoft's ad server on Viacom's US Web site, rights given to Microsoft to sell remnant display ads on that site, and an agreement by Microsoft to buy ads on both Viacom's online and broadband networks.

So where AOL is putting its cash at the moment into swallowing up smaller online advertising technology specialists, the Microsoft behemoth is now teaming with an entertainment mogul, although it's unclear at this point whether Microsoft or Viacom gets the better part of that deal financially.

But on both counts, the deals signify growing industry consolidation, along with widening use of potentially intrusive technologies for analyzing Web site usage on consumer sites.

History has shown us all too often that this type of consolidation can squeeze out smaller competitors -- and that this, in turn, can ultimately spawn higher pricing levels for customers.