AOL Launches Ad Search Service

A booming online ad market beckons.
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Time Warner's

(TWX)

AOL division is the latest tech company looking to increase its stake in the booming online ad market.

On Monday, AOL launched a service that will let it sell ads next to search results on its Internet portal. Previously, all AOL search ads were powered by

Google's

(GOOG) - Get Report

popular AdWords ad-serving technology.

But by selling a part of the ads itself, AOL hopes to allow advertisers to target users more effectively through campaigns that tie together graphic ads -- where the company is already a major player -- with search results.

Dubbed AOL Search Marketplace, the new service was conceived as part of the December 2005 deal in which Google paid $1 billion for a 5% stake in AOL. Prior to its launch on Monday, AOL was testing the service with a group of 30 advertisers.

Google and AOL share the revenue garnered from serving up ads next to search results on AOL's site. The two companies will continue to do so for ads sold by AOL, though the distribution of the split will be different. The companies decline to provide any details about the terms of the revenue sharing, according to

The New York Times

.

Though Google is likely to receive less revenue from the ads sold by AOL, the search giant may not earn less overall from the partnership. If the move brings more advertisers onto AOL's platform, the amount bid for keywords could be pushed up. And if the portal succeeds in placing more relevant ads next to search results, the amount of click-throughs could also increase. Both trends would offset the financial impact on Google.

AOL's move makes it the latest to build its position in the lucrative Internet ad market. Recently, it was revealed that

Microsoft

(MSFT) - Get Report

sought to increase its presence and was in talks to acquire ad technology company

DoubleClick

. Google was

also listed as a suitor.

Shares of Time Warner gained 0.4% to $21.12 in recent. Shares of Google slipped 0.6% to $468.86.