AOL to buy Quigo as last big advertising deal

NEW YORK Wed Nov 7, 2007 4:14pm GMT

Randy Falco, chief executive of AOL, addresses the audience in New York April 17, 2007. Time Warner Inc's AOL said on Wednesday it did not see any more big acquisitions after agreeing to buy advertising technology company Quigo as part of its restructuring into a one-stop online advertising shop. REUTERS/Lucas Jackson

Randy Falco, chief executive of AOL, addresses the audience in New York April 17, 2007. Time Warner Inc's AOL said on Wednesday it did not see any more big acquisitions after agreeing to buy advertising technology company Quigo as part of its restructuring into a one-stop online advertising shop.

Credit: Reuters/Lucas Jackson

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NEW YORK (Reuters) - AOL said on Wednesday it would buy Internet advertising technology company Quigo to bolster its ad force and make it more competitive with Google Inc and Yahoo Inc.

A source familiar with the matter said the purchase price was about $340 million. AOL, a unit of Time Warner Inc, did not disclose financial terms.

The deal, which adds 100 employees, marks the last big acquisition AOL plans as part of a restructuring to transform itself into a one-stop online advertising shop, AOL Chief Executive Randy Falco told Reuters in an interview.

"I expect it to begin to add to growth in 2008," he said, referring to AOL's online advertising growth, which is a big concern among investors. Ad growth slipped to 16 percent in the second quarter and 13 percent in the third quarter, from 40 percent levels earlier.

Quigo, which signed a deal with Time Inc in June and has more than 500 publisher relationships, is an Internet ad-targeting company that lets advertisers buy sponsored listings, much like Google's AdSense, based on keywords or subjects.

Advertisers have little say on where Google places their ads, but Quigo's AdSonar product lets advertisers place their ads on specific Web pages, including pages featuring topics or keywords such as "mutual funds" or "health and science."

The Quigo system also lets publishers control their relationship with advertisers, rather than surrender control to a middleman like Google.

Quigo gives AOL "access to a ton of relationships with a ton of premium publishers, thousands of advertisers and unique technologies," Quigo CEO Michael Yavonditte told Reuters. Quigo has deals with TheStreet.com, News Corp's FoxNews.com, and Walt Disney Co's ESPN.com, among others.

SPIN-OFF?

The deal will add to Time Warner's growing roster of online ad technology firms.

AOL restructured its advertising business in September, consolidating into one division ad network Advertising.com; Tacoda, which targets users based on their habits; wireless ad network Third Screen Media; video ads company Lightningcast; and ADTECH, a global ad-serving company.

Some investors have called on Time Warner to spin off all or part of AOL, with expectations growing after Jeffrey Bewkes was named earlier this week to succeed Time Warner Chief Executive Richard Parsons on January 1.

Asked what he thought Time Warner's view on AOL was, Falco said, "They just showed how they feel about our potential by supporting another big acquisition for us."

The success of AOL is seen as critical to Time Warner's sluggish stock price. The stock rose 1 percent to $18.54 following its third-quarter earnings report on Wednesday, which largely met Wall Street expectations.

"AOL is picking up leading technologies -- the premier names and smart people," said Stan Sandberg, principal at boutique investment bank Gridley & Co LLC, which specializes in interactive marketing and digital media. Sandberg spoke on Tuesday ahead of the announcement on Quigo.

Sandberg added, "Now that it will be consolidated under Platform A, they really are positioned beautifully to being the leading advertising technology company."

The deal for Quigo comes amid a buying frenzy in the interactive advertising market and follows Google's $3.1 billion pact to buy DoubleClick and Microsoft Corp's $6 billion agreement to buy aQuantive Inc.

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