AOL to buy Quigo as last big advertising deal

By Kenneth Li

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.