AOL plans to strengthen its online advertising business by acquiring Tacoda, a company that specialises in delivering ads based on users' online activities.

AOL entered into a definitive agreement to acquire Tacoda, whose 'behavioural targeting' technology will complement AOL's online advertising services.

AOL and Tacoda didn't disclose details of the transaction, which will close after customary approvals are obtained.

AOL, which is owned by Time Warner, is in a so far successful, years-long transition from a subscription-fee based business to an advertising-based business.

Like Google, Yahoo and other major internet players, AOL is busy boosting its capabilities to provide a variety of online advertising services, including search, video, syndicated, mobile and graphical ads.

In order to capitalise on the fast-growing online ad market, AOL, Yahoo, Google and others have resorted to purchasing online ad services companies.

For example, Google is in the process of buying DoubleClick for $3.1bn, while Yahoo recently closed its acquisition of Right Media. In May, Microsoft announced its intention to buy digital marketing services provider aQuantive for $6bn. Meanwhile, AOL acquired Third Screen Media and AdTech AG this year, and Lightningcast last year.