By investing $1 billion in AOL, Google may be placing AOL in a position to go public as a separate company and could reap a big return.
John Battelle wrote about the Google-AOL deal, where Google will purchase a 5 percent stake in AOL and maintain its presence on AOL’s properties as a search and advertising provider. Google could have lost 10 to 12 percent of its revenue had AOL went through with a deal to replace Google with Microsoft.
The $1 billion price tag could be chump change for Google if AOL breaks away from the Time Warner fold and goes public. Battelle, in an admittedly speculative post, posted that AOL executives have told him they would take the company public if the numbers look good.
He also sees Google making that investment because they were promised some kind of lucrative payback. “(W)hy would Google invest in a subsidiary of Time Warner, unless they were promised some kind of liquidity event?”
For this deal, Batelle sees a 100 percent return for Google should things play out well with an AOL IPO:
If AOL goes public and is seen by by Wall Street and others as the equivalent of a cheap ticket to Google revenue, it may well pop into Yahoo like valuations – to $50 or 60 billion in market cap or more. If that happens, Google’s makes a cool $2 billion on its 5% stake – close to what it made when it first went public.
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David Utter is a staff writer for murdok covering technology and business.
