• by Laurie Sullivan  @lauriesullivan, September 2, 2010

AOL renewed a search and an ad agreement with Google Thursday, cementing a decade-long partnership -- but it appears that expanding the deal to encompass mobile and video support clinched the deal. The five-year deal, announced Thursday, includes a revenue share on a per-search basis. Financial terms were not disclosed. Many believed the prior contract, scheduled to expire in December, would go down to the wire before the Time Warner spinoff would make an announcement.

Mobile search -- previously powered internally by AOL -- will become a major focus as the company builds applications and content for the medium, confirms an AOL spokesperson. Two months ago AOL hired Palm VP David Temkin to head mobile, and earlier this week announced the acquisition of Rally Up, which makes Rally Up and FacePlant, mobile social networking applications for the iPhone and the iPad. The apps compete with Loopt, Foursquare and Gowalla by allowing people to share locations with select friends.

Mobile has been a difficult channel to monetize and none of the behemoths have figured out an effective path yet, says Amielle Lake, CEO at Tagga Media. The climb to meaningful revenues has been slow. Although there are billions of consumers on mobile phones, the adoption of mobile content is still relatively small compared with the online world.

Google, Yahoo, Microsoft and Apple chose different routes. Google focuses on search; Yahoo, content; Microsoft, mCommerce and Bing; and Apple, display, Lake says.

Google, under pressure to grow its search inventory, needs to build additional scale to generate increased revenue. "Renewing the AOL deal and extending it to mobile supports this strategy," Lake says. "We anticipate Google will target many additional deals like AOL to increase its reach in mobile."

Aside from mobile search, Google will continue to support search and products across AOL's network of sites worldwide. Those familiar with the deal say it operates similar to the agreement signed in 2005, where AOL's sales and marketing team sells display ads, Google will support search ads. It's not clear whether AOL has the option to sell search ads, too.

A video content partnership also has been added to the renewed deal. The two companies agreed on a partnership that will bring AOL's video content to YouTube. An AOL spokesperson confirmed that video content will become a major push for the company as it continues to rebrand.

When Tim Armstrong stepped in as AOL chairman and CEO, he worked on the company's strategy and cost structure, but he also recognized the importance of finding the perfect fit to power search and ads. AOL executives spoke with counterparts at a variety of search engines worldwide. When it came down to "serious negotiations, Google put an amazing deal on the table -- a deal mutually beneficial to both companies for search and ad search products, as well as expanding into hugely important areas," according to a source close to the deal.

With both Armstrong and Jeff Levick, president of global advertising and strategy, being ex-Googlers, there's no doubt that company execs had insider knowledge required to ink the best possible terms, as well as determine the best possible way for the two companies to collaborate, according to Aaron Goldman, author of "Everything I Know About Marketing I Learned From Google." In the book he explains how AOL execs rebranded the company as a new economy content company.

"It's interesting to see the deal covers more than just Google distributing search ads to AOL, and that it has AOL providing content to Google," Goldman says. "AOL execs did a good job positioning the company to capitalize on the type of content that's easier to monetize -- not news, weather, and sports but travel, entertainment and health. I see AOL succeeding with content where newspapers are failing. And it's ironic because Google succeeded in online advertising where AOL failed."

Search marketers will benefit from the deal too, according to aimClear founder Marty Weintraub. "More bang for the buck, right?" he says. "It will benefit AOL because of an increased sampling of data. I hope they enjoy it. AOL also will give Google a lot of money like all the rest of us through the revenue-share deal."

Well, maybe. As Halloween approaches next month, Brad Butler, chief operating officer at Asadart Ecommerce Specialty Shops, will become increasingly consumed with ensuring that people searching for costumes and accessories find them at halloweenexpress.com. Butler doesn't buy ad display ad space or paid search directly from AOL -- but he does a ton of advertising on Google, from display to search to TV to remarketing. He also buys space from several other networks, "so one way or the other I have to believe some of our ads end up on the AOL network."

Butler doesn't care where the conversions or the clicks originate as long as they're profitable.