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Friday, December 16th, 2005

AOL Slips Out of Microsoft's Grasp. Seen Running Towards Google

 

AOL, which has been likened to a greased pig, has apparently slipped out of Microsoft’s grasp and was last seen running south towards the Googleplex.

Earlier today, Reuters and the Wall St. Journal (no link – sub. req.) reported that Time Warner, owner of AOL, has entered exclusive talks with Google, effectively shutting out MSN at the last minute. The story is based on information from an unnamed source said to be close to the negotiations. A similar story that ran in the Journal last week said MSN was very close to a deal with AOL.

Time Warner wants to move AOL away from lagging subscription based revenues and take advantage of the growing market for paid search advertising. The deal it currently has with Google is responsible for a substantial portion of AOL’s online revenues and about 2 – 4% of Google’s. It expires in June 2006.

According to both Reuters and the Journal, the deal being discussed would allow AOL to place advertising beside and among search results provided by Google. In turn, AOL branded properties would be promoted alongside sponsored search results at Google. There was no mention of what types of advertising would appear or how AdWords distribution on AOL properties might be affected.

MSN wanted a way into AOL in order to establish a platform for a breakthrough in the paid search advertising market currently dominated by Google. Its proprietary paid search ad unit, adCenter is expected to be open for general public use early next year. A deal with AOL would have given adCenter an enormous leg up in competition with AdWords and Yahoo Search Marketing.

AOL, the greatest greased pig of all, has a bit of play left in it. It will be interesting to watch how the story develops over Time. Warner buy into a search engine?


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