Google also is offering a $300 million credit that AOL can use to buy keyword-based ads from Google, the companies announced Tuesday.
Google will become the only shareholder in AOL other than Time Warner. Google also will have "certain customary minority shareholder rights, including those associated with any future sale or public offering of AOL," the companies said in a statement.
Under the new global advertising partnership, AOL will be able to sell all types of ads, including search, banner and display, across Google's network, which includes Google's own Web sites and the publisher sites that display Google-powered ads, said Marissa Mayer, Google's vice president of search products and user experience. Google's home page and core search results page will stick with text-only ads, while graphical ads could appear on Google's video and image search sites, she said.
AOL will be able to use the $300 million credit to purchase search-related ads through Google's AdWords auction system or for other undetermined promotional purposes, Mayer said. The deal also calls for the creation of an "AOL Marketplace through white labeling of Google's advertising technology" that will enable AOL to directly sell search ads on AOL-owned properties, the companies said.
Also under the deal, Google will "make sure AOL Webmasters architect their content" so it gets maximum exposure to Google's Web crawlers, but will not exchange any proprietary information to do that. She addressed concerns that arose before the deal was announced, saying an agreement with AOL could bias Google's search results. "We provisioned into the deal that there will be no way to influence the core search algorithm," Mayer said.
The companies said they will collaborate on online video search and showcase AOL's premium video service within Google Video, as well as allow Google Talk and AIM instant messaging users to communicate with each other.
"This agreement is key to fulfilling our commitment to realize the potential of AOL's very large online audience," Dick Parsons, Time Warner chief executive, said in a statement. "A critical piece of this strategic alliance will be our content, which we will be making more accessible to Google users."
Google Chief Executive Eric Schmidt said: "Today's agreement leverages technologies from both companies to connect Google users worldwide to a wealth of new content. We've also created a simple way for AOL Marketplace advertisers to buy and place search-related advertising across the AOL network. This partnership is an important next step for our companies."
Several analysts gave the deal a thumbs up, especially for Google.
"I don't see it as a strategic technology deal. I see it more as a tactical advantage, especially against Microsoft," Piper Jaffray analyst Safa Rashtchy said of Google's investment amount. "It gives Google a laboratory or testing ground for them to test new ideas about advertising. I don't see the AOL network to be of strategic value to either Google or Microsoft."
Google and AOL complement each other, said Todd Chanko, an analyst at JupiterResearch. "Google has locked up paid search, and AOL does really well with the display and banner ads and the other forms of advertising," he said.
Google derived about 10 percent of its advertising revenue, roughly $400 million, from its partnership with AOL through sponsored listings within its search engine in the first three quarters of this year. The companies first partnered three years ago.
The deal, details of which emerged last week from unidentified sources, leaves Microsoft out in the cold after months of negotiations with Time Warner over AOL's search business. Microsoft was on the verge of striking a deal before the surprise turn in Google's favor late last week.
The Google-AOL deal would give AOL a valuation of $20 billion. Time Warner shares closed at $17.74, giving it a market capitalization of nearly $82.7 billion, compared with Google's $429.74-per-share closing and more than $127 billion market cap.
Google had 48 percent search market share in October, compared with 22 percent for Yahoo, 11 percent for Microsoft's MSN and 7.2 percent for AOL, according to Nielsen/NetRatings.
Billionaire Time Warner shareholder Carl Icahn, who controls 3 percent of Time Warner shares--some owned directly and some controlled indirectly through a fund--and has been organizing a proxy battle for control of the company, wants to split AOL off. He warned the Time Warner board on Monday against making a "disastrous" and "short-sighted" deal with Google that would preclude a merger or other transaction between AOL and some other company.
CNET News.com's Greg Sandoval contributed to this report.
- More from News.com on this story's topics
Search
Advertising
Microsoft
Time Warner
Google
See more CNET content tagged:
America Online Inc.,
Google Inc.,
Time Warner Inc.,
image search,
agreement
- Interesting to see the Google-AOL IM partnership
- But, does this mean AOL will open up and support Jabber? That would be nice.
- Reply to this comment View reply
- So much for "Do no evil"
- AOL is evil and now Google owns part of them.
- Reply to this comment View reply
- I just pray
- That we don't see those big, flashy annoying ads everytime I log on to google. Like many others, I despise these ads screaming at you "Please buy my crap!!", but I DO click on google's ads just because they're not intrusive and genuinely helpful. If Google doesn't realise that then they're not as smart as first thought.
- Reply to this comment View all 2 replies
- Another Dinosaur Bites the Dust
- Business as usual, and dirty practices just lose market when you deal in an almost perfect market - that is the nature of the internet ? almost frictionless, almost perfectly informed, almost ubiquitous. MS is the big loser, now that Google precludes them to buy AOL, the weakest/less expensive player (kind of the American Motors of the pack). Yahoo would be just too expensive and too full of air to buy with MS ?real? money. What we are seeing now is how two guys, with the simple idea of giving stakeholders what they really want, in less than 10 years take over an old and business as usual company. The Do No Evil thing is not only for the customer (the experience that 99% of us have) but also to announcers, and employees ? the happy new world (hopefully not Huxley?s) If things go the way they should, MS might fall under the same spell, once the ?little people? loses fear of Linux. Once guys like me feel comfortable installing and supporting a Linux system, the game might be over for MS. And then again, for that to happen, the priesthood that ?owns? Linux, and solves the problems of the servers of the world, should be smart and make things as simple for the non-initiated as it is to unwrap XP and install it. They have to lose a little bit of cachet, and earn the general acceptation.
- Reply to this comment
- Microsuck is left out
- Good news!
- Reply to this comment
- Twilight of the AOL-gods.
- What we are really seeing is a long and complex war playing out. This isn't a war over the future of AOL, because it doesn't have one. This is a war over who gets to feed on the carcass of AOL. No matter how you look at things, AOL is dying, yet in its decline there remains great value to players that will long outlast it. AOL represents tens of millions of users who are losing their fear of going someplace else, using a new email address, etc. They have to go someplace, and whomever has the inside track to them will gain considerably if they know what they are doing. I don't think we should look at this in terms of what AOL will become with help from Google. I think we should view it in terms of how does Google parlay this in the long-term. This was a poker game against Microsuck, and Google won. If Google is going to buy-out Opera, AOL might finally dump its current IE browsing engine. Google Talk could ultimately be the first Google Service to replace a current AOL service. Blogger would be second. Google might help AOL unscrew its lousy approach towards email. In time, as AOL's dial-up base declines, I could see a vague scenario in which Google uses Gmail as the land-point for remaining AOL mail users (maybe helping preserve their old address'.) Google might be able to offer a client based on some rebuilt varient of Opera-if they buy it out, and replace AOL's faulty software. I can see Google slowing taking over, or co-oping AOL's services, until they effectively absorb all its users. Somebody needs to remind me if we are mis-reading something here. Isn't 5% of AOL actually AOL-Time-Warner? IE: Time-Warner with its connections to Road Runner, CNN, etc?
- Reply to this comment
- AOL, a web portal...
- Yahoo and MSN both have a web portal. It looks like Google is going to buy out AOL and use it as its own web portal.
- Reply to this comment View reply
... or log in manually to your email client and click the link in our email. Once you have confirmed your registration, please log in.
Start Doing More with Windows Mobile