At the end of 2005, Google made an interesting investment: $1 billion dollars for 5% of AOL. The move made sense for AOL – it provided it with a ton of new advertising, search, and revenue opportunities via a strong partnership with Google. Google, in return, got a 5-year deal to be AOL’s default search engine. But the value of that deal has only dropped like a rock in a lake since then. AOL has continued to deteriorate, despite highlights like the acquisitions of Bebo and Socialthing. Thus, Google’s decided to cut its losses and has sold back its AOL stake for $283 million.

According to Business Insider, Time Warner (AOL’s parent company) has made a regulatory filing with the SEC to confirm the transaction. On top of the sale, it was also revealed this afternoon that Time Warner has filed to make AOL its own company – an expected move. According to MarketWatch, the new company will be AOL Inc.

The sale means that Google, in total, lost $717 million as a pure investment. This doesn’t include the value it generated in its search partnership, but we’re willing to bet it wasn’t worth more than $700 million. It also places AOL at a valuation of $5.7 billion, a far cry from its peak during the first dot com boom, when everyone had an AOL account.

[Via Mashable]