Yesterday, AOL announced that it will begin selling some of it’s own search advertisements in order to increase its revenue. Back in 2005 Google and AOL (Time Warner) struck a deal in which Google bought a 5 percent stake in AOL, for $1 billion, and in return Google was allowed to sell all ads that appeared next to searches made on AOL sites. This service, called AOL Search Marketplace, is currently not allowing AOL to tap into it’s full advertising market share and in response to AOL’s decision last year to offer most of it’s services for free, AOL has been looking for a way to increase advertising revenue. Beginning Monday, April 9th, AOL will begin selling a portion of the ads displayed next to searches made by AOL users, fed through Google’s advertising system. This will allow marketers who already have ads that appear on other AOL pages, to better target AOL users.
Google is willing to be more accomodating to AOL, one of it’s largest partners, to continue edging out Microsoft who fought in 2005 to be AOL’s advertising partnet. Google, who currently shares AOL search ad revenue with AOL has devised a new formula making sure that AOL now retains a larger percentage of the sale. Not only will AOL benefit from this new deal, but Google may even see an increase in it’s own revenue. If the new advertising system proves to be more appealing for many marketers, companies will bid even higher to have their ads appear on AOL search pages.
By selling it’s own ads, through Google’s advertisement auction that we discussed in class, AOL will be able to increase its own revenue by increasing both the click through rates (CTR) of the advertisement slots on its pages as well as the values each marketer places on the ad slot. If the ads that appear next to searches on AOL pages are more relevant to AOL users, the ads will receive more hits, increasing their slot value. Other online subscription services should look to AOL as an example for how to offer public services for less, by honing in on the relevance of advertising and increasing ad slot value.
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