Internet search leader Google signaled that the 5 percent stake in Time Warner's AOL it purchased in 2006  might be worth considerably less than the $1 billion price tag it paid, the Mountain View, California-based company suggested in a quarterly report filed Thursday with the United States Securities and Exchange Commission. Google did not reveal how much it considers its stake to be worth now, however current market valuations have led some analysts to place its loss in value at between $250 million and $500 million. Decline In AOL Value Led To Impaired Investment Claim In the SEC filing Google said that its equity stake in AOL, which was first announced in December 2005, was impaired as of June 30 after experiencing a "decline in value". "We believe our investment in AOL may be impaired," Google added, noting that while it had stopped short of writing down its stake, at least temporarily, such a move could be necessary in the future. When Google purchased the stake with cash it was primarily done to forge a stronger advertising alliance with AOL, and to prevent rival Microsoft from landing its own deal with the one-time dial-up Internet access leader. By acquiring a stake in AOL, Google was able to expand on a ground-breaking partnership dating back to 2002 that vaulted the Internet search giant's advertising business into a leading position. At the time Google's large stake suggested that AOL had a value of some $20 billion, however during the two years since the purchase, AOL has struggled with declining subscriber numbers, and according to some projections published recently its present value may have been sliced in half to $10 billion. Almost half of AOL's subscribers have left in recent years, leaving it with less than 10 million paying members. No Write-Down Yet, But Action Could To Forthcoming "There can be no assurance that impairment charges will not be required in the future and any such amounts may be material," Google said in the Thursday filing, while noting that the balance sheets at present still  show its stake in AOL as "at cost." Time Warner has held informal talks over the past year and a half with several potential partners which could be interested in a deal for its AOL property, according to a variety of reports citing sources familiar with the negotiations. On Wednesday Time Warner announced that it plans to slice AOL in two by early 2009, separating the unit's online advertising business from its beleaguered dial-up access business, a move seen as a possible precursor to an eventual sale of either of the businesses as Time Warner regroups with an increased focus on its media. AOL Google's Biggest Ad Partner Until Yahoo Deal Begins Rivals Microsoft and Yahoo, coming off of failed acquisition talks, were both seen as possible suitors of AOL's advertising business, as each seeks to bolster their position in the battle to gain ground on industry leader Google. Until Google forged an advertising partnership with Yahoo earlier this year, Google's biggest advertising partner had been AOL, however the Yahoo deal is still awaiting regulatory approval before taking effect over the coming months. Estimates place the value of AOL's traditional dial-up business at some $3.7 billion and its online advertising properties at roughly $10.1 billion, according to a February Sanford C. Bernstein study, which found that fewer than 35 percent of people using AOL were subscribers. Google Hints At Eroded Value In Its 5 Percent AOL Stake Google has shown both continued strong growth and profit as AOL has faced decline, with the search leader earning some $2.55 billion in the first half of 2008 and holding cash reserves in excess of $12.5 billion. AOL  provides Google with about $75 billion yearly from Internet search advertising services, according to estimates. AOL's traditional dial-up Internet access service lost 740,000 customers during the fourth quarter of 2007, and saw sales fall 32 percent. Since the giant $112 billion merger of Time Warner and AOL in 2001, the firm's strength has largely rested on the shoulders of only two groups, cable television and AOL. Time Warner's Cable is the industry's second biggest cable service, behind only Comcast. On Monday AOL announced a move to expand the reach of its online advertising system Platform-A with the launch of a new third-party mobile ad network managed through its Third Screen Media arm. Related Links:
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