2 Comments

Summary:

Ending months of speculation about whether AOL (NYSE: AOL) and Google (NSDQ: GOOG) can make a new search deal, the companies announced this…

AOL

Ending months of speculation about whether AOL (NYSE: AOL) and Google (NSDQ: GOOG) can make a new search deal, the companies announced this morning that Google will be the portal’s exclusive search partner through Dec. 31, 2015. The expanded search and content deal now covers mobile search and puts AOL’s content on YouTube.

The new five-year pact comes months ahead of the December deadline, surprising those of us who watched this go to the wire last time around. This time, though, a lot of the freight was removed — in 2005, Time Warner (NYSE: TWX) was desperate to use guaranteed search revenue as a way to show AOL’s value and Google won the day with a $1 billion investment for a 5 percent stake in the portal. more important, former Google exec Tim Armstrong, a member of the search company’s negotiating teams in the past, is now chairman and CEO of an independent AOL. [Our interview with him about this deal.]

The companies are not disclosing the financial terms but this time around there’s no $1 billion investment in equity, as was the case in 2005. Instead, it’s all about search, advertising and content. On that level, the addition of mobile search and a concerted effort to make money from AOL content on YouTube gives it the potential to be a better deal. Through the first half of 2010, AOL has made $209 million from the current Google partnership. The companies also won’t confirm if some income is guaranteed but it would be surprising if guarantees against performance levels aren’t part of the deal. (The SEC filing today is limited. AOL promises to include the amendment in Q3 10Q but received permission last month to redact some Google-related information for competitive reasons so it’s unclear how much info will be made public.) [Barclays Capital analyst Douglas Anmouth just saif in a client note that "we do not think it includes any upfront or guaranteed payments for AOL."]

Armstrong told AllThingsD AOL wanted a higher level of search technology from Google. AOL was prepared to take the search for a deal through the year with multiple candidates. But Google had an edge from being AOL’s partner since 2002.More to come.

  1. Will be interesting to see which AOL content flow’s into Youtube… sounds similar to what Demand Media has been doing, and if so may position AOL’s Seed to drive video revenues.

    Share
  2. If you’re not diligent about diversifying your business you may end up like AOL – the dominant provider of search engines, email and instant messaging —- see how sticking to your core can be the end of your business http://bit.ly/9e1nff

    Share

Comments have been disabled for this post