AOL buys video ad company Lightningcast

AOL LLC has snapped up a team to play in the fast-growing Internet video business, acquiring broadband advertising firm Lightningcast Inc., the Internet service provider and Web portal said Thursday.

Privately held Lightningcast, in Washington, D.C., has developed systems for inserting ads into online audio and video content and reporting on the performance of campaigns. It licenses that technology to owners and distributors of broadband audio and video content, and last year began selling ad space for them as well, said Tom MacIsaac, Lightningcast president and chief executive officer.

Video use on the Internet is booming, with news segments, TV series downloads and free video sites such as YouTube leading the charge, as online advertising continues to grow. The acquisition lets AOL tap into both of those trends and is the most important of seven purchases it's made since last August, AOL spokesman Nicholas Graham said.

The companies agreed to the deal on May 5 and closed it on May 17. Lightningcast, with 34 employees, will stay in Washington and keep operating much as it has been, becoming part of AOL's Advertising.com division, MacIsaac said. The ad sales business it started last year, called InStream, will be merged with a video ad sales operation recently launched by Advertising.com, all under the InStream name. The combined business will serve a network of 300 Web sites and 175 multimedia streams per month while letting advertisers target video campaigns to certain audiences.

Lightningcast was founded in 1999 and has licensed its ad technology to customers including Comcast Corp., Reuters Group PLC and Lifetime Entertainment Services. The system is also used by audio providers such as National Public Radio and CBS Radio, MacIsaac said. AOL, a majority-owned division of Time Warner Inc., is also a long-time user of the Lightningcast technology. There is little overlap between Lightningcast's and Advertising.com's customers, according to AOL's Graham.