In a recent article from the Wall Street Journal, Google inc. and AOL have both agreed to extend their currently existing web partnership for another 5 years, focusing especially on mobile search and online video. AOL Chief Executive Tim Armstrong says that this agreement will mark "the company's turnaround process," as AOL will begin to transfer its video content to Google's YouTube.
Google, the web-search powerhouse that also controls 66% of the online search advertising market, has now progressed the expansion, as it realizes that nearly everything is trending towards the digital world. The people who have made the most out of this deal, however, is AOL. The company that began to slump once the Broadband era had begun and e-mail competitors begun to charge their services for free (most notably G-Mail, a mail service by Google). Since AOL had split with Time Warner, (AOL had become financially draining) their Ad business was declining by 27% and their search revenue- 18% of its overall revenue, was in the sharp decline as well (AOL chose not to keep up with technological advancements and suffered, as it is still tied with dial-up-Internet Services). And although I cannot tell you the fiscal specifics of the agreement (they have not yet been released), I can say that Google has bolstered the company that only 10 years ago was projected to have a 100 dollar a share rate*.
I think that AOL is a company that our industry should keep a very close eye on, because there still lies some tension in the company, as it could also potentially stifle the talks between itself and the social networking site Myspace. Myspace has kept a one month extension of their search-advertising partnership, but it's popularity has been on the decline since Facebook has proven to be the "go-to" site concerning social networking. As of today, AOL shares are now up 0.4% in the NYSE at $23.
-Severn Henry
Attached below is the article:
http://online.wsj.com/article/SB10001424052748704206804575467382148608518.html?mod=WSJ_Tech_LEFTTopNews#printMode
*: http://news.cnet.com/2100-1033-207859.html
This is a pretty interesting post. It seems to me that Google has been dominating the web search industry for a couple years. My main questions are regarding the role of AOL. What services are they currently providing that Google isn't? I'm curious as to why Google decided to engage in a web-partnership with AOL as opposed to purchasing/out producing them.
ReplyDeleteYou isolate another interesting trend which is the mass expansion of Facebook over the years. Myspace has become functionally obsolete with the rise of Facebook. There have been rumors that Google may attempt to engage the social networking market (McCabe, 2010), but nothing has been confirmed yet. Google could potentially be a significant competitor against Facebook who has remained functionally uncontested over the years.
Cite:
http://www.thestreet.com/story/10850593/1/google-acquisition-spree-is-social-networking-next.html?cm_ven=GOOGLEN
With Google being such a powerhouse already and extending they're relationship with AOL a very well known name, does this rise concern for an "internet monopoly"?
ReplyDelete