AOL will use a "white label," or rebranded version of Google's AdWords technology, allowing it to better target advertising to people who use AOL's search. Dubbed AOL Search Marketplace, the initiative will allow advertisers to bid on search keywords so that their ads can better reach AOL users.
The use of Google's technology comes as part of the late 2005 deal between the two companies. Google paid $1 billion for a 5% stake in AOL, which also guaranteed that Google kept AOL's share of the search market. Check the press release for that deal, and you'll see that this initiative was planned from the very beginning. (Further digging there reveals other areas that seem haven't materialized yet, including potential interoperability for AIM and Google Talk, and a proposed alliance in online video, now apparently rendered moot by Google's purchase of YouTube.)
Partnering with Google can only help AOL, which has a measly 5% market share in search at this point, down from 8% one year ago. (Yahoo!'s
AOL's transition from a paid subscription service to a free, ad-supported destination has been interesting thus far. We recently learned that AOL increased its ad revenues by 41% last year. I also peeked at the transcript from a recent Wall Street conference featuring Time Warner, and noticed a possibly unhealthy fixation with advertising that might threaten to obscure future innovation at AOL.
It's not surprising that AOL is moving in this direction. While it seems obvious that AOL has serious plans to further increase its success as an advertising platform -- a crucial revenue channel, now that the service has gone free -- hopefully it won't forget the importance of delivering new developments in content and services as well.
Alyce Lomax does not own shares of any of the companies mentioned.