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AOL To Buy Contextual Ad Company Quigo For $300 Million: Report

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AOL (NYSE: TWX) is in the process of acquiring New York/Israel-based ad targeting provider Quigo for $300 million, according to Haaretz, an Israeli daily newspaper. The rumors were first reported last week by AllThingsD here.

The purchase is designed to help the Time Warner unit better compete against the stepped up online ad initiatives from Google (NSDQ: GOOG) and Yahoo. Quigo’s two main ad serving products include AdSonar, which is similar to AdSense in terms of providing targeted placements on websites and through searches, and FeedPoint, a search engine marketing tool. Quigo has raised $45 million since opening its doors in 2000. The bulk of the investments, about $30 million, has been secured over the past year from existing backers, including Steamboat Ventures (Disney), Highland Capital, Leon Recanati’s Glenrock Ventures, IVP and Meritech Capital Partners.

As we’ve noted, Time Inc. signed an exclusive agreement with the contextual ad search company in June. The deal gave Time Inc.’s 15 web titles a custom version of Quigo’s pay-per-click ad service, allowing the online magazines to be sold as a single network. Time Inc. executives estimated that the Quigo deal will bring in $100 million in revenue over the next three years. Similarly, at the end of October, Quigo signed a multi-year contract with (NSDQ: TSCM) to develop a custom version of AdSonar for the financial news site. (Release)

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