No Worries, Sergey. We Can Make It Back in a Week on Mesothelioma Ads.

July 27, 2009 at 4:08 pm PT

ygf When Google took a five percent stake in AOL for $1 billion in 2005, it valued the company at about $20 billion. Last year the search giant wrote down $726 million of that investment.

Now, according to a regulatory filing, Google (GOOG) has gone and sold its share back to Time Warner (TWX) for $283 million, about a quarter of what it originally paid. Which means that in four years, AOL’s value has declined from an estimated $20 billion to an estimated $5.7 billion.

What an amazing loss of value.

According to the filing, AOL, which will be spun off by Time Warner later this year, made $678 million of the $2 billion in advertising revenue it collected in 2008 from its search advertising partnership with Google. Quite a chunk. AOL CEO Tim Armstrong best hope he’s able to renew that partnership when it expires at the end of 2010.

Tagged with: advertising, AOL, digital, financial, GOOG, Google, Internet, investment, partnership, regulatory filing, revenue, search, share, Tim Armstrong, Time Warner, TWX, value

comments so far. Add yours.

Elliott Spitzer

How’s this for a vote of confidence in AOL’s new management team from their former employers?

OUCH!!!

Sell now before the value declines even more?

You betcha!
http://blog.macb.net Mac Beach

I always thought that deal was a charity case to prop up a friendly competitor rather than a true investment.

Of course corporations aren’t supposed to do such things, but there really hasn’t been an reasonable alternate explanation (make it up in volume?)

AOL e-mail is actually pretty good in my opinion. In terms of functionality it surpasses any but Gmail and they have never engaged in the style of lock-in that Yahoo and Microsoft do (“pay us and we’ll filter spam!”). AIM and the Google equivalent already work well together and there are still a lot of AIM users out there. Worth something.

If I were Google I would consider them a reasonable purchase. They have a lot of dial-up users who don’t have many options, and what is better for dial-up users than Google’s light weight interfaces.

I’ve always thought Google could merge in the AOL infrastructure pretty easily, while at the same time Microsoft could take Yahoo and grind it into a fine blue powder, chasing its users elsewhere in the process.

There is still a lot of consolidation that could (and probably will) happen once more people reach “capitulation” on this whole econolypse thing.
http://allthingsd.com/ Dave Barnes

@Mac,

“If I were Google I would consider them a reasonable purchase.”

Reasonable = $100M