NEW YORK (AdAge.com) -- Google renewed its search deal with AOL for another five years, locking down a large source of search queries that convert well and blocking Microsoft's Bing from getting a foothold at another big portal.
AOL's deal with Google dates back nearly a decade, but it was set to expire in December, raising the question of whether Microsoft would make a play for the business and how much Google would pay to retain it.
AOL CEO Tim Armstrong and head of sales Jeff Levick were longtime Google executives, and Mr. Armstrong had strongly hinted that the search giant had the inside track to retain the deal. "Today is another important step in the turnaround of AOL," he said. "After nearly a decade-long partnership in search, we're looking forward to expanding our global relationship to mobile search and YouTube." Mr. Armstrong told employees the progress moved faster than expected.
Microsoft is in a race to build share for Bing to compete with Google, and AOL represented a nice available chunk of market share, 2.3% of U.S. queries as of July, according to ComScore. But a person close to the talks said the company decided the deal didn't make economic sense at the price AOL was asking, in part because Microsoft was wary that AOL's share is on the wane. "Is it 2.3% going to 5% or 2.3% going to 1%?" asked one executive briefed on Microsoft's thinking.
As of July, Google controlled nearly 66% of U.S. web searches, compared to 17% for Yahoo and 11% for Microsoft's Bing, according to ComScore. Microsoft and Yahoo agreed to join forces in search last year in a deal that will put Yahoo searches on Bing's technology platform. That integration has been under way for more than a year and is set to go live before the end of the year.
Google's AOL deal is global and includes a few additional aspects beyond traditional web search, including an agreement to develop mobile search and for AOL to distribute its video on YouTube. AOL and Google will also collaborate on display ad products.
AOL's search traffic is valuable beyond its sheer numbers because AOL users tend to click more on the ads, a legacy of AOL's user base, much of which also relies on the company for dial-up internet access. In search, advertisers pay for clicks or conversions, bringing Google more revenue.