UPDATE 1-Time Warner to buy Quigo

(Adds byline, analyst comment, background)

By Kenneth Li

NEW YORK, Nov 7 (Reuters) - Time Warner Inc's AOL (TWX.N) said on Wednesday it will buy Internet advertising technology company Quigo to bolster its ad force and make it more competitive with Google Inc (GOOG.O) and Yahoo Inc (YHOO.O).

One source familiar with the matter said the purchase price was approximately $340 million. The company did not disclose financial terms.

Quigo, which signed a deal with the company's magazine division, 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.

Whereas advertisers have little say on where Google places their ads, 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."

"With Quigo, we are putting the final pieces of Platform-A in place," AOL Chief Executive Officer Randy Falco said in a statement, referring to AOL's advertising technology strategy. "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."

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

The anticipated purchase will add to Time Warner's growing roster of online ad technology firms and is a part of AOL's restructuring plans to transform into a one-stop shop for advertisers.

AOL in September restructured its advertising business, consolidating 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, into one division.

The success of AOL, the Internet division of Time Warner whose online ad growth plunged in the second quarter followed by another slip to 13 percent in the third quarter, is seen as a major catalyst for its sluggish stock.

"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.

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

The expected purchase comes amid a buying frenzy in the interactive advertising market and follows Google's $3.1 billion deal to buy DoubleClick and Microsoft Corp's (MSFT.O) $6 billion deal to buy aQuantive Inc. (Reporting by Kenneth Li; Editing by Mark Porter/Quentin Bryar)