AOL to purchase online advertising company Quigo

AOL is buying an online advertising company that specializes in matching ads to specific portions of Web sites.

Photo: AOL to purchase online advertising company Quigo

The deal with Quiqo Technologies Inc., announced Wednesday, gives AOL a foothold in a market that Google Inc. now dominates with its lucrative AdSense network, which sells mostly text-based ads on behalf of other sites.

It follows AOL's September purchase of Tacoda, a leader in behavioral-targeting technology, and comes as AOL tries to offset declines in subscriptions by boosting its online advertising business - a strategy shift that showed lukewarm performance for a second straight quarter, according to financial statements issued Wednesday.

AOL, now based in Dulles, Virginia, plans to move its headquarters to New York to be closer to the heart of the advertising industry. And it is consolidating its ad services and acquisitions into a new unit called Platform A.

"With Quigo, we are putting the final pieces of Platform A in place," Randy Falco, AOL's chairman and chief executive, said in a statement. "We will be able to offer advertisers and publishers the most advanced set of tools, including contextual and behavioral targeting, superior analytics, and access to the largest display network in the marketplace."

Financial terms were not disclosed.

Quigo's AdSonar technology promises advertisers greater control than Google offers over where ads land - for example, specifying a particular site or even a section within that site. Besides text, Quigo's network also runs banner and video ads.

The acquisition, expected to close by the end of this calendar year, would let AOL expand contextual advertising on AOL and partner sites. And it would extend opportunities on the sites of Quigo's partners, including Forbes, Gannett Co.'s USA Today as well as the Walt Disney Co.'s ESPN and ABC.

Google, which owns 5 percent of AOL LLC, would continue to provide the ads that are generated alongside search results at AOL.

AOL's announcement came as its parent, Time Warner Inc., announced AOL ad revenue rose just 13 percent in the third quarter compared to the same period a year earlier, a decline from the 16 percent rise in the previous quarter.

Before that, ad revenues had grown 40 percent or more for four consecutive quarters, compared to the year before.

Time Warner said it expects online advertising growth to slow further in the fourth quarter because of price competition for display advertising and lower search advertising results. That pressure is expected to continue in the first quarter of next year.

AOL's Internet access subscriptions declined to 10.1 million in the United States, down more than 60 percent from the peak of 26.7 million in September 2002.

The purchase of New York-based Quigo would add about 100 people to AOL's payrolls, soon after AOL announced layoffs of 2,000 jobs worldwide so it could expand through acquisitions such as Quiqo's.

Earlier this year, AOL bought Third Screen Media, a mobile advertising company, and AdTech AG, a Germany-based network for delivering ads worldwide. AOL also previously bought Lightningcast, which specializes in inserting targeted ads into video and audio clips.

AOL's rivals also have been buying online ad companies.

Google agreed to acquire DoubleClick Inc. for $3.1 billion (2.1 billion EUR), though the deal still faces regulatory review. Yahoo Inc. paid about $650 million (441.5 million EUR) for the portion of Right Media Inc. it did not already own - 80 percent - and agreed to buy BlueLithium Inc. for $300 million (204 million EUR). Microsoft bought aQuantive Inc. for $6 billion (4.08 billion EUR).