AOL to Launch Search Ad Service With Google on Monday

Time Warner's AOL division will introduce a paid search service on Monday backed by Google's technology to help advertisers better target AOL users.

AOL Search Marketplace is part of a December 2005 agreement with Google in which the Web search leader purchased a $1 billion stake in AOL, the online division of the world's largest media company.

As part of the deal, sponsored links from Google's AdWords technology appeared on AOL Search pages. AOL Search Marketplace, a customized version of AdWords, now lets advertisers reach AOL Search customers more effectively, AOL said.

The service will help AOL capture advertising dollars from ads linked to search terms in text, in addition to the money it makes from display ads, such as banners. AOL's search service drew 311 million queries in February, according to tracking firm comScore Media Metrix.

"If I've got a relationship with a big marketer and half of their interactive ad spending is going toward something I don't offer (search advertising), I'm going to want to acquire that capability," AOL Media Networks President Mike Kelly said in an interview.

Boosting online ad sales is the top priority at AOL, which restructured its business last summer to offer most of its services to users for free. AOL ad sales rose 49 percent in the fourth quarter of 2006 from a year ago to nearly $2 billion.

"This gives us the opportunity to deepen our customer relationship and keep that growth rate going," Kelly said.

The company is one of the Web's largest seller of display ads. But it has fallen behind in paid search, where advertisers bid on keywords from search terms.

Google's dominant text search technology has made it the most powerful advertising channel on the Internet. According to Jupiter Research, some 25 percent of online ad spending went to Google in 2006 compared with 8 percent to AOL.

The deal does not include the AOL Video search service yet, but they will likely be added over time, Kelly said.