Google Provides 1/3rd Of AOL's Ad Revenue

timarmstrong3 tbi

Google (GOOG) no longer owns 5% of AOL: It sold its stake this month to Time Warner (TWX) for $283 million, or about 1/4 of what it paid for it in 2006, a SEC filing revealed yesterday. But it still represents a huge portion of AOL’s ad business.

According to AOL’s filing, its search ad partnership with Google generated $678 million in revenue last year. That’s 1/3 of AOL’s $2.1 billion in ad revenue, and 16% of AOL’s $4.2 billion in overall sales.

As AOL’s dialup business — almost half its sales in 2008 — continues to shrink, that Google money will be even more important. So whether or not Google likes the fact that its former sales boss Tim Armstrong is now AOL’s CEO, it’s a crucial partner to AOL.

The good news for AOL: The Google deal runs through Dec. 19, 2010, so Armstrong has time to figure out what’s next. The bad news: There’s little reason for Google to renew on terms favourable to Armstrong, especially now that it doesn’t have an equity stake in AOL. Google could easily tighten the screws.

This means that unless AOL can make itself more desirable — or trick Microsoft into winning an auction for its search ads — it could be short some of the business that, according to Time Warner’s last annual report, “was the only category of AOL’s advertising revenues that grew year-over-year” in 2008.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

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