Posted July 1, 2008 3:05 pm by with 6 comments

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Let’s climb aboard the way-back-machine and take a trip to 2005. Carrie Underwood was rocking American Idol, Batman Begins made us believe in prequels again, and Google was buying a 1 billion dollar 5% stake in AOL.

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.

  • AOL, although low traffic, has the best conversion rate for many of my consumer targeted clients based on what GA reveals.

  • Mel

    Some AOL investors that I know have done well in the past, but how will they do in the near future is my question.

  • Google is good for traffic, but I must agree that the other search engines do give better conversion from click (on ppc). Also better conversion on sales in the natural listings too. So is it worth paying google rates? Weel I think the answer is – Depends on the industry.

  • I know some AOl investors and they really immensely used AOl

  • I can see this happening for sure. Is AOL ever going to regain its former glory?

    Blog Marketing Journal’s last blog post..Goodbye Google Referrals – Hello Google Affiliates

  • AOL is dying due to them being so pushy. I remember how impossible it seemed to get their icon off of my computer and even more so to cancel a subscription. I don’t think there is much of a benefit for any company that gets involved with them anymore.