Google rues $1bn AOL investment

Google acknowledged late on Thursday that it may have made a bad bet on AOL.

The search giant said in a filing with the US Securities and Exchange Commission (SEC) that its $1bn (£518m) investment for a five percent stake in Time Warner's web unit "may be impaired" and that it may have to take a charge in the future.

"Based on our review, we believe our investment in AOL may be impaired... We will continue to review this investment for impairment in the future. There can be no assurance that impairment charges will not be required in the future, and any such amounts may be material to our consolidated statements of income," states the SEC filing.

The December 2005 deal secured a renewal of Google's search-advertising deal with AOL, preventing its largest ad partner from defecting to Microsoft. The deal gave AOL a valuation of $20bn at the time.

Google did not estimate in its filing what AOL might be worth today, but observers have suggested a figure closer to $10bn.

Google's deal allows it to demand that Time Warner spins off AOL in an initial public offering of stock or buys back Google's stake, which would result in a $500m loss for Google.

Time Warner, perhaps signalling its intention to dispose of AOL to focus on its media business, announced on Wednesday that it would split AOL's dial-up unit from its advertising business by early 2009.
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