5 ms·

Google Sells AOL Stake Back To Time Warner For $283 Million

20 points by Mystalic 17y ago

michaelfairley 17y ago
Everyone is claiming that Google lost $700 million in this deal, which is true, but I think it's more important to notice that by selling now they are avoiding future losses. It always sucks to sell a stock after you've lost money on it, but it sucks even more to ride it down further if there's very little hope of it recovering.
- mikedouglas 17y ago
  It's also important to consider the counterfactual where it was Microsoft who had landed that search/ad deal. If I remember the discussion correctly, many considered this a defensive move on Google's part. I can't imagine that Google had a high opinion of AOL's prospects, so I assume they thought blocking MS was worth the loss.
  - seldo 17y ago
    Well, let's see if was -- they did this in December 2005, meaning the $750m works out to about $17m per month of the deal. Does Google make more than $17m per month from its partnership with AOL? Almost certainly, but it probably hurt a lot. They were expecting to be able to spread the cost over a lot longer, I'm pretty sure.
lionhearted 17y ago
Any ideas how much Google made from the deal? If they did the same that AOL did, they made out okay on their investment despite the lower sell price: > The Google relationship generated $678 million in revenue for AOL in 2008, $642 million in 2007, and $573 million in 2006
robk 17y ago
Google already had written this off as a defensive cost to be sure. There's never been a surprise about this deal not being, prima facie, a good equity investment. However since it's been publicly traded, losing three points of market share would have had a much more material effect on the market cap, such that this made perfect sense to do. As for how much it generated, I'll bet it was breakeven. Assume Google had a 90/10 or 85/15 revshare with AOL, so Google made maybe $100M-$150M off this deal if the prior three years' numbers are correct above.

5 ms·

Google Sells AOL Stake Back To Time Warner For $283 Million

20 points by Mystalic 17y ago

michaelfairley 17y ago
Everyone is claiming that Google lost $700 million in this deal, which is true, but I think it's more important to notice that by selling now they are avoiding future losses. It always sucks to sell a stock after you've lost money on it, but it sucks even more to ride it down further if there's very little hope of it recovering.
- mikedouglas 17y ago
  It's also important to consider the counterfactual where it was Microsoft who had landed that search/ad deal. If I remember the discussion correctly, many considered this a defensive move on Google's part. I can't imagine that Google had a high opinion of AOL's prospects, so I assume they thought blocking MS was worth the loss.
  - seldo 17y ago
    Well, let's see if was -- they did this in December 2005, meaning the $750m works out to about $17m per month of the deal. Does Google make more than $17m per month from its partnership with AOL? Almost certainly, but it probably hurt a lot. They were expecting to be able to spread the cost over a lot longer, I'm pretty sure.
lionhearted 17y ago
Any ideas how much Google made from the deal? If they did the same that AOL did, they made out okay on their investment despite the lower sell price: > The Google relationship generated $678 million in revenue for AOL in 2008, $642 million in 2007, and $573 million in 2006
robk 17y ago
Google already had written this off as a defensive cost to be sure. There's never been a surprise about this deal not being, prima facie, a good equity investment. However since it's been publicly traded, losing three points of market share would have had a much more material effect on the market cap, such that this made perfect sense to do. As for how much it generated, I'll bet it was breakeven. Assume Google had a 90/10 or 85/15 revshare with AOL, so Google made maybe $100M-$150M off this deal if the prior three years' numbers are correct above.