Alphabet Inc (GOOG)

[SeriousMoney]

Google, AOL and Microsoft
By Kate Mackenzie, Posted: 11:00 AM EST (16:00 London)
Financial Times, Monday, December 19, 2005

AOL's 20m internet customers make it a prized partnership target for both Google (NASDAQ:GOOG) and Microsoft.

About 10 per cent of Google's revenues come from advertisements placed on AOL's website, even though AOL gets most of the revenue from these sales.

The new agreement would be more than just a continuation of the existing AOL search marketing relationship.

Most controversially, the deal could see the introduction of graphic advertisements on Google's own website, marking a departure from the search engine's trademark stark, minimalist look which is popular with many users.

Google will allocate space in its own search results pages to provide links to content on AOL.com, which will carry AOL's logo. Although AOL will pay for this advertising up front, most of the cost will be credited back as part of the deal.

AOL will also have an exclusive right to sell banner advertisements that will appear on Google's websites, with AOL receiving 20 per cent of sales revenue.

Google would also be able to index AOL's large video library.

The proposed Google-AOL deal would leave Microsoft, which has put considerable effort into building its search and online advertising business, out in the cold. It had been negotiating with AOL for much of this year to take over the search marketing partnership when the agreement with Google ended.

Microsoft's MSN.com trails Yahoo and AOL as an internet destination, and Google leads for search engine traffic. A deal with AOL would have extended the reach of Microsoft's search technology and cemented its fledgling efforts to launch its own search marketing network to rival those of Google and Yahoo.

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