AOL Didn't Have A Choice For Search, And It Shows

Tim Armstrong

AOL doesn’t seem to have gotten any big upfront payments from Google for its search deal.

How come?

Probably because AOL wasn’t in a very good position to negotiate.

The speculation is that while CEO Tim Armstrong may have talked and even negotiated with a handful of search companies (he says it was six or seven), he only really ever had one choice…Google – the incumbent.

One source familiar with the process gave us two big reasons:

  • AOL has about ~4.5 million access subscribers who still generate huge amounts of cash for the company. It can’t do anything to scare them away. They are very used to seeing Google search results. Can’t mess with that.
  • The only real rival to Google for AOL search was Microsoft. But AOL couldn’t do a search deal with Microsoft because it wants to sell to Microsoft. The only reason Microsoft would ever actually buy AOL is to get AOL’s search business. If AOL turned itself over to Bing for a cash payment now, Microsoft would no longer have any incentive to take that step. It’s that whole if-you-give-the-milk-away-no-one-will-buy-the-cow thing.

And then there’s another reason: Money. Microsoft’s revenue-per-search is so much lower than Google’s that Microsoft would have had to have taken a huge loss on the deal to guarantee as much revenue to AOL as Google will deliver. 

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.