According to a Washington Post article on December 17, 2005, Google purchased the 5% stake in AOL “as part of a far-reaching business and advertising partnership aimed at boosting AOL’s financial prospects as the Internet service struggles with the loss of millions of subscribers.”
The AOL partnership was an important win for Google at the time. Rival MSN was deep in the bidding process to replace Google as the search engine for AOL users when Google waltzed in with the $1 billion trump card.
Of course, Google’s bid was accepted and now 3 years later Google has the option to bail. As reported by The Register on July 1, 2008 “Today is the first day that Google can sell its stake in AOL… The deal either gives Google five per cent of AOL should there be an initial public offering or gives Time Warner first refusal on the stake.”
Will Google opt-out of its stake in AOL?
Revenue targets aside, I feel AOL is still a good strategic partner for Google. Keeping its stake in AOL will help Google prevent AOL’s eyeballs from falling into the hands of Yahoo and Microsoft. This may prove very valuable as Google continues to erode market share away from its competitors and negotiate additional ad distribution deals.
The most bizarre part of all this for me is the multitude of conflicts between Google and AOL.
Google is a champion of Net Neutrality (for the most part), while Time Warner is adamantly against the concept. Google is further developing its portal and social networking capabilities, an area AOL dominated for a long time. The two compete on a whole host of other services like stock quotes, images, messenger, news, email, video, and search.
Perhaps hedging bets and keeping enemies close is the best strategy for Google. At the very least, Google can continue to control yet another share of eyeballs in its Borg-like assimilation of the web.