The Dulles, Virginia-based AOL is attempting to transform itself from a dial-up subscription-based company to an advertising-based content portal. It was only last August that Time Warner-owned  company finally announced its plan to stop charging users for services. 

AOL recently completed its third quarter under this new free subscription/advertising model. While losing subscription revenues, AOL managed to post a non-GAAP profit of $542 million by offsetting those loses with strong ad growth and savings on infrastructure and subscriber marketing—those gazillions of annoying CDs that used to jam up your mailbox—according to an analysis released Monday by Michael Nathanson of Bernstein Research.

“AOL is no longer seeking to bolster its subscriber base with high churning/low economic value subscribers,” Mr. Nathanson said. “The first quarter results showed lower costs and higher margins, implying that the cost savings are more than off-setting the subscription revenue declines.” 

The Adtech announcement is the latest AOL move to bolster Advertising.com, which is the largest ad network, reaching 88 percent of all Internet users, according to comScore. AOL on Tuesday announced it would acquire Third Screen Media, one of the largest mobile advertising companies and last year AOL acquired Lightningcast, an audio and video advertising technology company. 

The acquisition of Adtech will provide AOL with Adtech’s ad serving and management platform and display and email marketing. AOL already has a search advertising agreement with Google, but this deal with strengthen AOL’s online display advertising. 

Advertisers are increasingly interested in snazzy images and rich media Internet ads, sparking a rush by web publishers such as Google, Yahoo and others to compete for control of the rapidly growing market. Google agreed to acquire ad serving and management company DoubleClick for $3.1 billion and Yahoo agreed to buy display ad exchange firm Right Media for $680 million. 

Speculation has buzzed on Wall Street recently about the potential acquisition of 24/7 Real Media, ValueClick and aQuantive, three public companies that are smaller competitors to DoubleClick.