Buying Your Own Ad Revenue

from the well,-it's-something-to-do dept

We'd been trying to ignore the various rumors over who (between Google, Yahoo and Microsoft) would be buying part of AOL, after the rumors kept dragging on. A few weeks ago, we were told (but chose not to pass on to all of you) that it was a lock that Microsoft was buying part of AOL, and that it would help them jumpstart their own search ad business. However, making us look incredibly smart in skipping over it (rather than the truth: incredibly bored by the story), now comes the news that it actually is Google who is stepping up and buying a piece of AOL. The deal still isn't official, leaving plenty of time for us to look stupid again, but everyone seems to be writing about it as if it's a done deal. It's $1 billion for 5% of AOL, and various deals to work together, including some head-scratching language about AOL getting to place image ads on Google (something we had been told Google had decided was "evil"). Some people have also said that AOL will now get some preferred placement on Google results. Both of these are not confirmed, so it may pay to wait for an official statement from either party. However, this is pretty clearly a situation where Google was paying to retain revenue. AOL, which has used Google for years, made up 10 to 12% of Google's ad revenue, and while they clearly could have made it up elsewhere, it definitely would look bad to lose that much revenue in one move. So, in effect, Google is taking some of the cash they have on hand, and paying it to AOL in exchange for keeping the revenue. Either way, it seems odd to value a business that simply can't keep its customers at $20 billion.

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