Google May Not Win AOL's Hand with Bing in the Hunt

By Clint Boulton  |  Posted 2010-06-04 Print this article Print

There was a time when handling search for AOL was a golden money-making opportunity, but that time is 5 years-plus past.

AOL CEO Tim Armstrong, who in no small point of irony was Google's top ad sales gun in North America before he took the helm at AOL, said at the D8 conference his company is talking with multiple potential partners to secure a new Web search deal.

AOL's search deal with Google, in which Google powers AOL's search, expires Dec. 19. Google had purchased a 5 percent stake in AOL from Time Warner Inc. for $1 billion in 2005, but the value of the deal soured as AOL's fortunes faded.

Google said in a 2008 SEC filing that it feared its investment in AOL was impaired and sold its stake to Time Warner in July 2009 for $283 million.

Google's investment valued AOL at $10 billion in 2005; the sell-off indicates AOL is worth $5.66 billion. AOL was spun out of Time Warner as a separate company last December and has been struggling to transform into an ad-supported media company.

Still, Armstrong said his company was starting conversations about a deal renewal with Google, adding:

Google has been [AOL's search] partner for close to a decade. We know what works and doesn't work. Google knows what works and doesn't work. Both companies' needs have changed. [But] we are very close with Google.

That sounds like loyalty. Having worked on the deal while he was at Google, Armstrong knows getting back in bed with Google would be the easiest thing to do.

While Google has remained AOL's Web search provider, Microsoft, which Google beat out in the last go-round in 2005, may have a good shot to replace Google with its now one-year-old Bing search engine.

Loyalties aside, the issue may boil down to money. Can Bing compete with Google on price?

These are the type of deals Bing needs to steal from Google (the way Google poached AOL from Microsoft and Yahoo from several suitors almost a decade ago) to really rate well with investors and resonant with industry analysts.

It worked for Google. Bing needs to turn the tables. Microsoft CEO Steve Ballmer acknowledged at the same conference, which coincided with Bing's first birthday:

Well, we launched only a year ago, but we're the first search engine to gain market share in a long time...but this is a long game. We're up 54 percent in unique users year over year; our demographics are good. We overindex with younger crowds. We've done a lot to establish a name and to make a good product that delivers relevant results. But I think we have our work cut out for us in a battle with a very large behemoth.

I agree with the last sentence; striking a deal with AOL could help. How much? I don't know. I don't know anyone who uses AOL anymore, but they are out there.

Nielsen NetView puts AOL as the No. 5 Web parent company for home and work in the U.S. (Google and Microsoft are No 1 and No. 2):

AOL Stats.png

Moreover, Nielsen has AOL at No. 4 in the U.S. market for search, with 2.5 percent of the market compared to Google's 65 percent share and Bing's 13 percent plot. Bing would grab a little search share in addition to its take over of Yahoo's search.

Every little bit helps in Bing's battle with Google. |

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