In December 20, 2005, Google announced a strategic alliance with AOL. The financial agreement was that Google would invest $1 billion in AOL for 5% ownership. According to the press release sent out at the time, the strategic agreement would go as follows:
* Creating an AOL Marketplace through white labeling of Google’s advertising technology – enabling AOL to sell search advertising directly to advertisers on AOL-owned properties;
* Expanding display advertising throughout the Google network;
* Making AOL content more accessible to Google Web crawlers;
* Collaborating in video search and showcasing AOL’s premium video service within Google Video;
* Enabling Google Talk and AIM instant messaging users to communicate with each other, provided certain conditions are met; and
* Providing AOL marketing credits for its Internet properties.
Due to Time Warner’s desire to spin off AOL as its own separate entity and several other complications, Google decided to cancel the deal and cash their losses.
Google took a major hit financially when cashing out on their 5% AOL ownership. Even though they invested $1 billion, they sold the equity for $283 million back to Time Warner. The transaction took place on July 8th and is based on pegging AOL’s valuation at $5.7 billion.
As of right now it is unclear what changes will be made strategically between Google and AOL after the Time Warner subsidiary spins off as an independent entity. I doubt much will change.