AOL Buffs Up Search With Help From Google

AOL announced on Tuesday new search capabilities thanks to an expanded relationship with Google, as it seeks to match search moves by Yahoo and MSN.

The two companies extended their multiyear search deal for both algorithmic and paid search. A Google representative declined to say when the deal would expire.

Among the changes to AOL Search are local search that uses member zip codes on file; more vertical search capabilities in areas like entertainment; and tools that help users refine their searches. AOL Search displays tabs to automatically switch a search from Web sites to images to news to chat. As part of the expansion, AOL will display Google’s paid listings in both the business listings and directories of AOL Yellow Pages. AOL has a deal with Switchboard to provide the yellow pages listings.

With the overhaul, AOL hopes its search will be more relevant to queries, providing local information if a searcher is looking for a particular shop or returning lists of images if a searcher wants a picture.

Although its search is mostly relegated to its 25.3 million members, AOL is a major player in search. According to ComScore’s qSearch service, AOL drew 19 percent of searches in August, beating out MSN but lagging far behind Google (31.5 percent) and Yahoo (26 percent).

AOL’s revamped search follows in the footsteps of Yahoo, which this spring added a number of similar improvements to its search service. MSN is also overhauling its search. (LookSmart, MSN’s paid-inclusion provider, was an early casualty of that effort, announcing yesterday that MSN would not renew its distribution deal.)

Like Yahoo, AOL is sprinkling search throughout its service, from the time a user arrives at the Welcome screen to deep within AOL content areas. Like its rivals, AOL also offers a search toolbar.

The move also highlights the importance placed on the Google relationship at AOL. Like Yahoo and MSN, AOL is highly dependent on search for future revenue growth. According to research this summer by Merrill Lynch, search will account for 33 percent of AOL’s ad revenues in four years’ time, compared to just 5 percent last year. The key to this growth, Merrill Lynch analyst Jessica Reif Cohen noted, is AOL’s partnership with Google for both algorithmic and paid search.

Unlike Yahoo and MSN, however, AOL indicates it is happy to rely on a third party that might be considered a rival, at least in search, to provide such a key source of revenue. It even features Google prominently in some of its television commercials for the service. Yahoo spent heavily this year to bring search in-house, buying both Inktomi and Overture Services. MSN is devoting considerable resources to building up its own algorithmic capabilities to rival Google’s.

Google and AOL have been close partners since AOL defected from Overture to use Google’s then-new AdWords paid listings in May 2002.