Google Sells $1B Stake in AOL for $283M
Google earlier this month sold its $1 billion stake in AOL for $283 million, confirming the search engine giant's concerns from a year ago that its investment was impaired. Time Warner is set to spin AOL off, and the company will have to go it alone versus real-time and social services from Google, Yahoo, Microsoft, Facebook and Twitter.Google sold its $1 billion investment in AOL for just $283 million July 8, more than four years after buying the 5 percent stake in the Web portal in a coup against rival Microsoft, according to a regulatory filing July 27. Google had purchased the stake in Time Warner's online unit in May 2005, beating out Microsoft to win the right to continue to provide search and advertising through AOL's portal, which at the time was the second most trafficked Website. Google's investment valued AOL at $10 billion in 2005; the sell-off implies AOL is worth $5.66 billion.
What was a sound business decision and a strategic coup at the time has turned sour in just a few years, as AOL's fortune has faded.
Upon expiration of this agreement, there can be no assurance that the agreement will be renewed, or, if the agreement is renewed, that we would receive the same or a higher revenue share as we do under the current agreement. In addition, there can be no assurance that if we enter into an arrangement with an alternative search provider the terms would be as favorable as those under the current Google agreement. Even if we were to enter into an arrangement with an alternative search provider with terms as or more favorable than those under the current Google agreement, such an arrangement might generate significantly lower search advertising revenues for us if the alternative search provider is not able to generate search advertising revenues as successfully as Google currently does.AOL is hamstrung by its lack of a search engine. Without one, AOL noted it is not able to package and sell search advertising along with display advertising services outside of AOL Media. "As search advertising represents a significant portion of online advertising spending, we believe that our lack of a proprietary search service could adversely affect our ability to maintain and increase advertising revenues," AOL added. The big questions remain: What will happen when AOL's agreement to use Google's search expires in 2010? Will the company still be viable then? AOL's future remains uncertain at a time when companies are increasingly turning to real-time content and search services, such as Twitter. More on TechMeme here.