Google Customer Acquisition cost (AOL) just went up!
Time Warner to Sell 5% AOL Stake to Google for $1 Billion – New York Times
Rebuffing aggressive overtures from Microsoft, Time Warner has agreed to sell a 5 percent stake in America Online to Google for $1 billion in cash as part of an expanded partnership between AOL, once the dominant company on the Internet, and Google, the current online king.
Actually, this is a brilliant deal structure!
I did a little research and the Analysts are saying that:
• AOL represents 2% to 4% of Google’s total revenue
• Google’s total revenue is estimated to be $4B in ’05 and $6.41B in ’06
If Google’s AOL revenue grows at 10%/yr over the next 5 years they will make the $1B investment back plus own a 5% in what one would think is an appreciated AOL. Because of the investment, there is great deal of incentive for Google to want AOL to succeed! So incentive for Google to cooperate in the sales channels. Google blocks the deal that would have put MSN in the game. Google saves the AOL revenue stream.
Pretty smart on Time Warner’s part! Kudos!
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