AOL formally announced its revised partnership with Google Inc. today. Google has agreed to purchase a 5 percent stake in AOL for $1 billion giving AOL a valuation of $20 billion USD. Google will also offer AOL advertising “credits” valued at $300 million which will allow AOL to promote its web properties on Google’s search service. In exchange, AOL will continue to use Google for its web search and display Googles advertising on its network of sites over the five year term of the agreement.
While the deal gives AOL a renewed focus and valuation few would have deemed probable, the New York Times reports that Google’s intention is to leverage the deal into an expansion of its advertising products.
Eric E. Schmidt, Google’s chief executive, said, “We have not offered a complete advertising solution until this point. This is about expanding the network of our revenue and partners and advertisers, and we couldn’t do that by ourselves.”
AOL will be able to sell both Google’s traditional search advertising and new graphical display advertising. The advertising may be placed both on Google’s own web site and the many sites on which Google places ads.
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