AI
Friday, December 16, 2005 9:21:18 PM
Google Poised to Invest $1 Billion in AOL
By Chris Gaither, Times Staff Writer, latimes.com
4:01 PM PST, December 16, 2005
Google plans to invest $1 billion in Time Warner's America Online in a deal that, if completed, would deepen the ties between two Internet advertising giants and leave rival suitor Microsoft in the cold, people familiar with the negotiations said today.
After months of much-publicized talks with both companies, Time Warner Chief Executive Officer Richard Parsons called Microsoft Chief Executive Officer Steve Ballmer this morning to say he had agreed to a deal with longtime partner Google, according to three people familiar with the discussions.
"Google pays a $1 billion premium for an insurance policy that insures domination of a very valuable part of the Internet economy," said Jordan Rohan, an analyst with RBC Capital Markets.
The Time Warner board must still approve the deal. It is scheduled to meet Tuesday, said a person briefed on the company's plans who, like others, would speak only on condition of anonymity because of the sensitive nature of the talks.
Google, Time Warner and Microsoft declined to comment.
Seeking a foothold for its nascent search engine technology, Microsoft had waged a nearly yearlong effort to replace market leader Google as the provider of ads for AOL's search engine. Microsoft and Time Warner discussed a variety of options, including forming a joint venture combining much of their Internet operations and possibly Microsoft taking a minority stake in AOL.
When word of Microsoft's overtures leaked out in October, Google began fighting to keep AOL, a partner that had generated 10% of Google's $3.2 billion in revenue last year.
To close the deal, Google made some key concessions.
Its negotiators agreed to promote AOL's services across Google.com, a change for the company that made famous the sparse white Web page. Google also hired AOL to sell non-search ads to Google's advertising partners.
Google will continue to take 20% of the revenue generated when people click on the text ads in AOL Search, and AOL will take 20% of the revenue from flashy banners and other display ads it sells on the Google network, according to people familiar with the deal.
Google also agreed to make an investment that would give AOL, which has dragged on Time Warner's stock as its dial-up Internet access business shrank, an implied value of $20 billion.
"AOL's relevance on the Internet was highly questionable to investors 12 to 18 months ago," said Rob Sanderson, media analyst with American Technology Research. "Now it's definitely moving in the right direction."
For its part, in addition to keeping an important source of revenue, Google gets to put AOL's treasure trove of video clips — from music videos to movie trailers to TV reruns — into its own search engine.
Parsons and Google CEO Eric Schmidt shook hands on a deal in Time Warner's New York headquarters about 9 p.m. Thursday, according to a source close to Time Warner.
The five-year deal, if approved Tuesday, would expand the two companies' partnership into 2011.
http://www.latimes.com/business/la-121605aol_lat,0,4828775.story?coll=la-story-footer&track=more....
By Chris Gaither, Times Staff Writer, latimes.com
4:01 PM PST, December 16, 2005
Google plans to invest $1 billion in Time Warner's America Online in a deal that, if completed, would deepen the ties between two Internet advertising giants and leave rival suitor Microsoft in the cold, people familiar with the negotiations said today.
After months of much-publicized talks with both companies, Time Warner Chief Executive Officer Richard Parsons called Microsoft Chief Executive Officer Steve Ballmer this morning to say he had agreed to a deal with longtime partner Google, according to three people familiar with the discussions.
"Google pays a $1 billion premium for an insurance policy that insures domination of a very valuable part of the Internet economy," said Jordan Rohan, an analyst with RBC Capital Markets.
The Time Warner board must still approve the deal. It is scheduled to meet Tuesday, said a person briefed on the company's plans who, like others, would speak only on condition of anonymity because of the sensitive nature of the talks.
Google, Time Warner and Microsoft declined to comment.
Seeking a foothold for its nascent search engine technology, Microsoft had waged a nearly yearlong effort to replace market leader Google as the provider of ads for AOL's search engine. Microsoft and Time Warner discussed a variety of options, including forming a joint venture combining much of their Internet operations and possibly Microsoft taking a minority stake in AOL.
When word of Microsoft's overtures leaked out in October, Google began fighting to keep AOL, a partner that had generated 10% of Google's $3.2 billion in revenue last year.
To close the deal, Google made some key concessions.
Its negotiators agreed to promote AOL's services across Google.com, a change for the company that made famous the sparse white Web page. Google also hired AOL to sell non-search ads to Google's advertising partners.
Google will continue to take 20% of the revenue generated when people click on the text ads in AOL Search, and AOL will take 20% of the revenue from flashy banners and other display ads it sells on the Google network, according to people familiar with the deal.
Google also agreed to make an investment that would give AOL, which has dragged on Time Warner's stock as its dial-up Internet access business shrank, an implied value of $20 billion.
"AOL's relevance on the Internet was highly questionable to investors 12 to 18 months ago," said Rob Sanderson, media analyst with American Technology Research. "Now it's definitely moving in the right direction."
For its part, in addition to keeping an important source of revenue, Google gets to put AOL's treasure trove of video clips — from music videos to movie trailers to TV reruns — into its own search engine.
Parsons and Google CEO Eric Schmidt shook hands on a deal in Time Warner's New York headquarters about 9 p.m. Thursday, according to a source close to Time Warner.
The five-year deal, if approved Tuesday, would expand the two companies' partnership into 2011.
http://www.latimes.com/business/la-121605aol_lat,0,4828775.story?coll=la-story-footer&track=more....
