AOL stake sold by Google with a big loss of $717 million

As per the regulatory filing, stake in AOL of Google was sold by it with a heavy loss of $717 million. AOL stated in its filing with U.S. Securities and Exchange Commission that Time Warner has on June 8 purchased 5 percent share of Google in AOL for $283 million. The same share of AOL was bought by Google in late 2005 for a price of one billion dollars.

Time Warner had plans to spin off AOL at the end of the current year; this purchase will help Time Warner in its intention. Time Warner has been struggling all these years to get rid of AOL, after its merger with AOL in the year 2001. The combination of the two companies didn’t work as per the plans that were thought off. With new revenue options from online ads, AOL was not successful in keeping up with the revenue losses; the revenue loss was due to decreasing internet user subscriptions in the recent past that had kept AOL struggling with dipping revenue.

The transition to ad revenue based business was not as encouraging as the other parts of the industry. As per the studies done by Interactive Advertising Bureau the online ad spending of U.S. in 2008 increase by 11 percent but AOL was left way behind in this race; its online as revenue had dropped to 6 percent.

In the early part of the year Google told Time Warner that it has decided to sell its stake in AOL. Within couple of months the deal of selling stake in AOL was finalized by Google to Time Warner at surprisingly very low rate; its 5 percent share were sold at a price of  $283 million at an extreme loss of $717 million. At the time of selling also Google declared that AOL will remain a valued partner for them.