Google buys share of AOL

[Guest Vitamin X]

percent to 4 percent of Google's revenue on net basis, analysts have said.

 

Microsoft had been negotiating to get AOL to use its search technology instead, which would have almost immediately given the software giant a huge presence in its fledgling paid search business.

 

"AOL would have been a huge opportunity and a natural fit to jump start that business for Microsoft," said independent analyst Richard Greenfield. "If Google has boxed Microsoft out, it begs the question: How is Microsoft going to flourish online?"

 

Neither Google, Microsoft nor Time Warner spokesmen would comment.

 

Against the backdrop of these talks, corporate raider turned shareholder activist Carl Icahn is leading a group of shareholders advocating a breakup of Time Warner, saying the company is worth more in pieces than a conglomerate. The group has a 3.1 percent stake in Time Warner.

 

Icahn called the negotiations "a bit of a travesty," in an interview with Dow Jones Newswires on Friday.

 

"It is my belief that, if the proper partner were allowed to have control of AOL, shareholder value would be much more greatly enhanced than through a half-hearted joint venture that might only serve the purpose of entrenching management," Icahn told Dow Jones.

 

AOL is seen as a critical swing factor on search technology traffic among Internet media rivals Google, Microsoft and Yahoo, just as it once was on online advertising, a category it practically invented in the early 1990s.

 

AOL made surfing the Internet and chatting online a household phenomenon. But it has been a drag on Time Warner's stock as it has lost millions of dialup Internet subscribers since the merger of America Online and Time Warner in 2001.

 

Since then, the Dulles, Virginia-based unit has focused on providing free programming and services to boost online advertising revenue.

 

Time Warner has acknowledged in the past that one of the key missing components of its Internet strategy was a paid search component, but has not specified with whom the company was talking.

 

Google, and to a lesser extent Yahoo, have enjoyed dramatic growth in their search advertising businesses over the past year. The companies generate revenue each time a Web user clicks on text advertisements that run alongside Internet search results.

 

Under the terms of the discussions, AOL's programming will be promoted through Google's paid search listings in a special section of Google's "sponsored search listings" that are often at the top of its search results, the source said.

 

Microsoft proposed a joint venture with AOL to combine the two companies' advertising businesses that would have relied on Microsoft's advertising system to run ads across AOL's network of sites, said another source familiar with the matter.

 

The proposal at the end of the negotiations did not involve a possible equity for Microsoft in AOL, the source said.

 

"There was always an elephant whose name was Carl," said the source, speculating that a joint venture with Microsoft would make a possible AOL spin-off difficult. Google's investment gives AOL a value of $20 billion.

 

Google's reemergence as front-runner for the AOL search and advertising business would, if a follow-on deal is consummated, mark the second time that Google has wrested a contract with AOL away from its rivals.

 

A year ago, AOL Europe had awarded its advertising business to Yahoo but after a last-minute intervention by top Google executives, the Web search leader was able to secure the AOL Europe advertising contract, according to published reports.

 

Time Warner shares were up 25 cents, or 1.4 percent, to $18.09 on the

New York Stock Exchange in late afternoon trade. Google shares were up $7.47, or 1.8 percent, at $430 on Nasdaq. Microsoft shares were up 11 cents at $27.03 on Nasdaq.

[Mole 0]

I heart Google.

[Guest Danny Dubya v 2.0]

I'm not a fan of either company, but it will be fun to see, watching Google and Microsoft go at each other's throats. If anyone at this point is capable of dethroning M$, it has to be Google. I know this is a rather bold prediction, but the way I see it, Google will take an unexpected advantage of their partnership with Sun and release a Solaris-based operating system with ports of their windows desktop applications, as well as distribute OpenOffice on their site.

 

If the rumoured Google OS is indeed realized and becomes very popular, all the software that's written for it can be ported over with relative ease to other UNIX-based systems such as Mac OS X and Linux distros, continually weakening the argument that most software only runs on Windows. Assuming such a thing would happen some time after Apple releases an Intel-compatible OS X, that'd be quite the triple whammy in the operating system market, Microsoft's bread and butter.

 

That's the most ideal situation, but either way, M$ is on borrowed time, IMO.