Sorry Bill and Steve, WSJ Reports Google Near $1 Billion Deal With AOL

If Gates and Ballmer wanted a deal with AOL (Time Warner) as a Christmas gift, it appears that they’re not going to get it. The MSFT vs. GOOG game of the “Price is Right” appears to be ending according to this just posted story from the Wall Street Journal: AOL Nears Deal With Google (sub req).

Here are a few key facts and passages from the article by Julia Angwin, Kevin J. Delaney and Dennis K. Berman:

+ AOL and Google are now in “exclusive negotiations.” Microsoft has been “shut out” of the negotiations at this point.

+ Google will pay $1 billion for a 5% stake in AOL.

+ “AOL would be able to sell advertising among the search results provided by Google on AOL Web properties.” At the moment, sponsored links come from Google…AOL’s sales staff would also sell display ads across Google’s network of Web publishers.”

+ “Google will promote AOL’s Web properties among the sponsored links in its search results, and will include AOL’s collection of online videos among its search results. Google’s arrangement to provide search technology for AOL, which was set to expire at the end of next year, would be extended for five years.”

+ Don’t look for a deal and/or an announcement until next week after a Time-Warner board meeting.

With multimedia search being one of the hot topics of 2005, I find it interesting that AOL Video, which we’ve been talking about a lot this year both in terms of content and UI, will be visible in Google results in one form or another. It’s obvious that video and video search have been a high priority to the company over the past year and they’ve done some impressive work. AOL has easy access to lots of video content from Time-Warner, deals with other providers, and also its own multimedia crawler with SingingFish. It will be interesting to see (no pun) if any exclusive video that Google has would/will begin appearing on AOL? Also would future deals that both companies make for video content be made so the material would be accessible on both services? Will the AOL Video database of crawled video content continue to use SingingFish technology or will Google begin to using the SingingFish crawler?

Btw, don’t forget that AOL is currently testing (it works great for me) the delivery of high-quality videos while your computer is quiet.

I’m also wondering about future issues with Google and AOL in the instant messaging space. AOL is the leader. Will Google Talk become interoperable with AIM, so the two systems and their users can chat or talk to each other? Earlier this year, MSN and Yahoo announced a deal that will allow users of either service to chat with each other. Would the AIM and Google Talk tech be merged? I could go on with VoIP, broadband, wi-fi, cable tv, and all sorts of other stuff but let’s not get way ahead of ourselves.

From the SEW Archives:
+ Overture & Inktomi Out, Google In At AOL (May 1, 2002)
+ AOL Moves Fully To Google (August 5, 2002)
+ AOL Renews With Google (October 8, 2003)

Want to discuss? Check this thread in the SEW Forums.

Postscript: Reuters has now published a story on the still yet to be announced deal.

The Google-AOL talks would expand on a relationship which analysts estimate account for 2 percent to 4 percent of Google’s revenue on a net basis. AOL uses Google’s search engine

Postscript 2: Perhaps the most interesting part of all of this is found (via Searchblog ) in this coverage from the NY Times that says that Google will give AOL preferred placement on the Google site.

Here’s the passage:

Google, which prides itself on the purity of its search results, agreed to give favored placement to content from AOL throughout its site, something it has never done before.

Does this mean “favored placement” of ads or of organic results? I think before starting to speculate we need to know more on just what Google is thinking here. If Google would start giving “favored placement” for organic results then it would sure be a “wow” moment/change of direction in Google’s history. From an advertising standpoint it would be interesting to see how the SEM community would respond. Battelle uses the expression “jump the shark” to describe the NYT passage in his post but adds that it also just might be a “trial balloon.”

Of course, it’s very unlikely we hear anything official about any of this until next week.

Postscript 3 (Saturday): David Vise’s article from the Washington Post on the possible deal.
From the article:

+ AOL also will get the exclusive right to sell online banner ads for Google. AOL will keep about 20 percent of the proceeds from those ad sales, while Google will get about 80 percent.

+ “AOL is a valued partner,” Google spokeswoman Lynn Fox said yesterday. “We look forward to continuing to work with them.”

+ AOL has provided Google with more than $400 million in ad revenue so far this year, according to public filings.

+ The existing arrangement — under which Google provides text-based ads and free search results on AOL — will continue, with AOL keeping 80 percent of those ad proceeds and Google taking 20 percent.

+ One source said AOL will also have the right to buy graphic ads that appear alongside the text-based ads Google traditionally has displayed to the right of its free search results.

+ Google’s search results, based on equations that rank them according to relevancy, will not be changed as a result of the new partnership with AOL, sources said.

Postscript 4: See AOL’s Choice of Google Leaves Microsoft as the Outsider has more details on AOL having concerns over MSN’s new ad network and arguing that its own ad serving software was beter.

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