Google finally sold back its 5 percent stake in AOL to Time Warner. Originally valued at $1 billion in 2005, Google ended up getting back only $283 million, including some cash distributions. There goes roughly $700 million, but Google already took a writedown on the investment back in the fourth quarter when the whole world was going to pot and nobody really noticed.
Time Warner took back the shares in preparation for the eventual public spinoff of AOL. When Google initially bought the shares, it valued AOL at $20 billion. Based on the price Time Warner paid for the repurchase of the shares, AOL is now worth $5.7 billion. I’m sure by the time it actually goes public, new CEO Tim Armstrong and AOL’s bankers are going to be arguing that it is worth a lot more.
So did Google get hosed on this investment? Pretty much. But you have to remember that it was part of a larger search outsourcing deal which Google still makes money from today. AOL on its own commands a 3 percent search market share and as such is probably Google’s largest partner site. Even if Google didn’t make back its investment over the past four years, the search volume AOL provides itself is worth paying for. (Search is a volume game, the more search queries you can throw ads against, the better the ROI). So don’t feel too bad for Google. It was buying distribution which helped it maintain its overall market dominance.
