AOL Signs New 5-Year Search Advertising Deal With Google, Adds Mobile
AOL CEO Tim Armstrong
Ramin Talaie/Bloomberg
Tim Armstrong, chief executive officer of AOL Inc.
Tim Armstrong, chief executive officer of AOL Inc. Photographer: Ramin Talaie/Bloomberg
AOL Inc. signed a new five-year Internet search advertising deal with Google Inc., expanding the partnership to mobile search and the placement of AOL videos on YouTube.
AOL and Google, operator of the most-used Internet search engine, are announcing the contract renewal three months before the Dec. 19 expiration of their current deal. In a statement today, the companies said Google will provide AOL’s Web search and AOL will get a share of the revenue from text ads that run alongside search results.
AOL Chief Executive Officer Tim Armstrong, who joined from Google last year, made it a priority to reach a broader search partnership as part of a turnaround plan for AOL since it was spun off from Time Warner Inc. The new global deal, struck after a year of talks, includes cooperating on mobile applications and search functionality and showing AOL-produced videos on Google’s YouTube video-sharing site.
“It’s an upgrade to every aspect of the old deal,” Armstrong said in an interview. “This deal is a lot of revenue and a lot of potential profits for AOL.”
Armstrong said the deal is an improvement economically and declined to disclose specifics of the revenue-sharing split. AOL talked to five or six potential partners before deciding on Google and negotiations intensified in July, he said.
AOL, based in New York, rose 15 cents to $23.05 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have lost 1 percent this year. Mountain View, California-based Google gained $2.85 to $463.18 on the Nasdaq Stock Market and is down 25 percent this year.
Last Deal
“This is good news for AOL,” Clayton Moran, an analyst with Benchmark Co., wrote today in a research note. “We are pleased to see AOL stay with Google given its stronger monetization than other search providers.”
In 2006, Google beat out advances from Microsoft Corp. and renewed a search agreement with AOL originally signed in 2002. To seal that deal four years ago, Google bought a 5 percent stake in AOL for $1 billion. Google wrote down the investment by $726 million in 2008 and last year Time Warner bought back the stake for $283 million. Armstrong has said that 2006 pact was done “purely for money.”
The new agreement doesn’t include upfront payments or equity stakes, he said today.
“The last deal didn’t work out very well,” Armstrong said. “We decided basically to stick to what we knew already from the partnership worked really well, which is generating operating income.”
Advertising revenue from the Google relationship, the majority of which came from search and targeted ads, was $556.7 million last year, about one-third of AOL’s total ad revenue.
To contact the reporter on this story: Sarah Rabil in New York at srabil@bloomberg.net
Rate These Stories
Rate this Page