About Four years back, in 2005, Google made an interesting investment: $1 billion dollars for 5% stake in AOL. The purpose – AOL provided Google with a ton of new advertising, search, and revenue opportunities via a strong partnership. Google, in return, got a 5-year deal to be AOL’s default search engine. Ain’t that kool?
But the value of that deal has only dropped like a rock in a lake since then. AOL has shown a downward trend. Condition has continued to deteriorate, despite highlights like the acquisitions of Bebo and Socialthing. Thus, Google’s decided to minimize its’ losses and has sold back its AOL stake for $283 million.
According to Business Insider, Time Warner (AOL’s parent company) has made a regulatory filing with the SEC to confirm the transaction. On top of the sale, it was also revealed this afternoon that Time Warner has filed to make AOL its own company – an expected move. According to MarketWatch, the new company will be AOL Inc.
The sale means that Google, in total, lost $717 million as a pure investment. This doesn’t include the value it generated in its search partnership, but one thing is for sure, it wasn’t worth more than $700 million. It also places AOL at a valuation of $5.7 billion, a far cry from its peak during the first dot com boom, when everyone had an AOL account. Now, how many still actually visit aol one a week?
AOL downtrend started with emergence of Google, Yahoo. Google’s GMail, GTalk killed almost every Email, IM service. But Google never thought,t he competition they bought is going to hurt them back.
According to new estimates coming in from research firms, Google managed to earn atleast around $300 Million in last 4 years, the total losses would sum up to be around $400 Million. That sum is just nothing for Google. They can start a new campaign and earn more than this in few months.
Though the competition they bought, had hit them back, it didn’t hurt much. Innovators and industry’s leading company will face these almost everyday.