Quigo investor sees mobile ad firms as next targets

By Michele Gershberg

NEW YORK (Reuters) - Companies that specialize in advertising on cell phones are likely to be the next industry acquisition targets as a nearly $11 billion buying spree of online ad companies comes to a close, a leading Web investor said on Wednesday.

Bob Davis, managing general partner at venture firm Highland Capital Partners, said the rapid consolidation of companies that serve and track Web ads had mostly ended with the acquisition of Quigo by Time Warner Inc.'s AOL.

Highland Capital was the lead investor in the company, which specializes in targeted advertising that appears as sponsored listings on Web pages. Davis previously served as chief executive of Internet company Lycos Inc.

"Quigo was one of the few remaining strong and growing large networks," Davis told Reuters in an interview. "I think there is another wave coming as it relates to networks on the mobile front."

A source familiar with the matter said the purchase price was about $340 million for Quigo. Davis would not comment on financial terms of the deal.

AOL Chief Executive Randy Falco said the purchase was the company's last major acquisition in its overhaul to a business focused on Web services and advertising.

Davis expects that the push into the mobile market by Web search leader Google Inc., which said this week it was building a mobile phone operating system, would focus even more attention on wireless advertising technologies.

"There's another wave of companies that are just getting off the ground right now in the mobile arena," he said.

Highland Capital has an investment in Quattro Wireless, which helps Web publishers build versions of their sites for mobile phones and sell advertising through them. Davis represents the firm on Quattro's board and said it was premature to talk about a sale of the company.

"There are a handful of companies that are making significant inroads in establishing meaningful mobile networks with premium branded publishers," Davis said. "I see that as being a very coveted asset over time by the major players."

Other areas ripe for investment include companies that can build audiences from the millions of Internet sites that are not highly trafficked but still cater to users desirable to advertisers, he said.

Google is waiting for regulatory approval for a $3.1 billion deal to buy Internet marketing firm DoubleClick, while its rival for Web applications and audiences Microsoft Corp purchased Web ad company aQuantive for $6 billion.

Other deals since the start of the year include WPP Group's purchase of 24/7 Real Media for $649 million and Yahoo Inc.'s deal to buy BlueLithium for $300 million. AOL also acquired Tacoda for what sources estimated was a $275 million transaction.

(Additional reporting by Kenneth Li, editing by Phil Berlowitz)