AOL Offers Ads Linked To Results Of Searches

By Cecile Daurat
Bloomberg News
Saturday, April 7, 2007

AOL, Time Warner's Web unit, has begun selling ads next to search results that appear on AOL's Web pages, using Google software.

The product, called AOL Search Marketplace, is the result of a partnership with Google, which spent $1 billion to buy 5 percent of AOL a year ago and is helping the company increase its online ad sales. The new software gives AOL more direct access to global search-ad spending, estimated at $12 billion last year.

"AOL is in an upward swing in terms of advertising," said Greg Sterling, an analyst at Sterling Market Intelligence in Oakland, Calif.

Ad sales at the Dulles firm jumped 41 percent, to $1.9 billion, in 2006, the third consecutive annual gain, after falling for three years. AOL built its business charging for access to the Internet, but the firm changed its business plan last year and now relies mostly on online ads for revenue.

Advertisers targeting AOL users were previously limited to branded advertisements, including banners and videos, and could not buy ads linked to AOL search results.

"It's the last piece of the puzzle for our customers who said they want to buy direct from AOL," Mike Kelly, president of AOL's media networks unit, said in an interview. "We're now going to compete for search dollars."

AOL and Google, whose site is the most-used for Internet searches, are to share revenue from AOL Search Marketplace, but financial terms weren't disclosed. Ad spending linked to Web searches will rise 45 percent to $16.3 billion this year, Merrill Lynch predicted.

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