AOL Snapping Up Internet Ad Startup Quigo for $300m

The exit of the year.

Time Warner Inc.'s AOL Internet division is about to buy Israeli startup Quigo for $300 million, the biggest exit of the year in Israel. Time Warner is the world's largest communications group, and AOL plans to use Quigo's technology to compete against Internet giants such as Google and Yahoo!

Quigo makes two products for Internet advertising. AdSonar, similar to Google's AdSense, places links on search results related to a given search. This happens without the user being aware that the order of links shown is based on the payments made by advertisers to the site's owner.

The other product, FeedPoint, serves up ads on search results or Internet publishing sites connecting the relevant ads to the user's interests.

Oded Itzhak and Yaron Galai founded Quigo in 2000. Galai is now a senior vice president at the firm, which had a number of private investors including Galai's father, Professor Dan Galai of the Jerusalem School of Business Administration of the Hebrew University.

The company has raised $45 million so far, $30 million of which was secured in recent months from existing investors: Steamboat Ventures, Highland Capital, Leon Recanati's Glenrock Ventures, IVP and Meritech Capital Partners.

The company recently signed a deal with Time Warner for its content sites.

The previous big sale this year was Nice Systems' purchase of Actimize for $280 million.

The online advertising industry has supplied quite a number of headlines recently: Google bought DoubleClick for $3.1 billion and Microsoft bought aQuantive for $6 billion. Now AOL is joining in the fray.

Quigo has not always had an easy time. After the bursting of the dot-com bubble, Quigo had problems raising money - and almost no revenues. The change came in August 2003 when Yahoo!'s online advertising arm, Overture, signed a deal with Quigo.

This is AOL's second recent acquisition in Israel after buying startup Relegence in November 2006 for between $50 million and $100 million.

AOL and Quigo, however, declined to comment on their acquisition deal.