AOL and Google just announced a five-year renewal and expansion of their ad deal — a key piece in AOL's attempt to reinvent itself as an ad-supported digital content company. Securing this deal is crucial to AOL's financial health. Here's how it works: Google provides its search service to AOL's content network and branded websites, and AOL and Google share the revenue from search ads.
How much is it worth to AOL?
More than $100 million a quarter — in the second quarter of the year ad revenues associated with AOL's Google deal were $98.5 million, in the first two quarters Google-related ad revenue was $209 million.
And this deal should yield AOL even more revenue because it goes beyond the companies' prior deal — it also includes mobile search and YouTube. AOL will bring its original video content to YouTube, and will get broader distribution and likely, better promotion of its celebrity news video from PopEater or a finance news segment from DailyFinance.com. The release says "the companies will work together to expand the alliance to cover mobile search" — we'll see what that means as AOL tries to bring more content to mobile apps.
CEO Tim Armstrong has been doing everything he can to reduce AOL's reliance on its legacy AOL mail and create a new kind of online content business. A few weeks ago Armstrong announced a major investment in local news sites, creating 400 new sites before the end of the year. AOL needs to monetize all that content; partnering with the biggest search engine aims to do just that.
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