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Time Warner Inc. is negotiating exclusively with Google Inc. to broaden a lucrative advertising partnership with Time Warner's America Online unit, abruptly ending negotiations early Friday with Microsoft Corp., officials close to the negotiations said.
"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?"
Brett, what do you mean by the plot thickening?
"Google, which prides itself on the purity of its search results, agreed to give favored placement to content from AOL throughout its site, something it has never done before."
Gulp. Am I reading this correctly? They're going to skew the serps TOWARDS AOL CONTENT to get this deal done?
[edited by: ogletree at 1:10 am (utc) on Dec. 17, 2005]
All business serves the market better under competitive stress......what was MSFT thinking here?
I'm guessing it's more that AOL is thinking. If I were doing the presentation for Google, I would be all over MS Search's 'issues'. AOL's forte is that they hold users' hands that need guidance. Skipping them along to the brink of the current MS Search is Lemming suicide.
that's what they are working on.
it's not about who "wanted" the deal.
it's about who "needed" the deal.
and google is ultimately still a "one trick pony" as far as revenue is concerned.
They NEED THIS DEAL.
Microsoft does not.
Don't forget...we have Vista launching later this year.
[siliconvalley.com...]
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Google to buy 5 percent of AOL for $1 billion
SEARCH BEHEMOTH BEATS OUT MICROSOFT FOR DEAL...As of this afternoon, the deal was not yet final. The source characterized it as a "handshake agreement over a term sheet," agreed to Thursday night in the offices of Time Warner, AOL's parent company.
But the source said both parties planned to hammer out the final details over the weekend in the hopes of making an announcement Tuesday. Time Warner's board of directors is scheduled to meet Tuesday to discuss the deal.
"Microsoft is probably unhappy and hurt," a source familiar with the long-running talks said - WashingtonPost
1. MS's "winner takes all" philosophy and its history of crushing other market participants,
2. The fact that Google really isn't a portal, and the relatively small extent to which Google offers its own content. It simply doesn't compete with AOL to the same extent as Yahoo and MSN, and thus there is less risk that a deal with Google would backfire.
Bottom line: A deal with MS may have seemed more risky; AOL may have been worried that MS is focused on taking the market away from AOL, along with Google and Yahoo.
With a partnership with AOL, G could be more like Y. But, then, Y keep evolving and I don't really know what that means.
AOL and G should work together well enough. They are both married to the idea that whatever the web becomes, they want to be the major players in that model. It's all about scale.
MS are much much more experienced in business the G.
What can AOL possibly have that Google needs?
(AOL and G are at opposite ends of the intellectual spectrum after all)
I shudder when fan-mail comes in from an AOL address.
A B-B-B-Billion dollars worth? I must have really missed something. -Larry
What does Google see that we don't? That newbies click alot of ads? Hmmm.
Can we get an office pool going for how many chairs Ballmer will throw over this one? ;)
What AOL can offer G is a sizable user base and more importantly user information. MSN and Y have this already and can capitalize on this. Say what you will about AOL going down the toilet in losing their base, they still have a formidable number and I doubt their new investors will just site ideally bye and let the company lose users.
Everyone's saying how MSN shouldn't have done this or that. AOL made this decision. G can offer AOL a lot more in ad revenue because of the existing technologies as compared to MSN's current technologies. Aside from a larger investment by MSN I don't know what else they could have done even if they were given the opportunity.
MS are much much more experienced in business the G.
Not the search business.
MSN's search results are horrible and their focus is fragmented from software to video games to search. Google has only one focus to catalog as much of the world's data in the most accurate and easy to use way possible.
A lot can be said for laser focus when going up against a bigger rival.
Google generates over 1 billion in revenue per quarter and according to their most recent financial statements have a cash value of $7.6 billion dollars. So even if they cut a check for a cool Billion it will be made up in less than a year.
We all think AOL stinks and it does but you can't ignore a user base of their size and when many of their subscribers do jump ship what search engine will they be familiar with and continue to use?
It won't be MSN.
Why not try to catch legions of "newbies" and techno phobes early and get them to trust and be loyal to the Google brand for the long haul?
If they can do this their market share will only grow while Microsoft's dips.
It's a battle for market share and long term supremacy. Maybe to Google that is worth a billion.
Let's say you had 1 billion dollars to spend in the search arena.
Would you spend it getting aol? Or would you spend it differently?
I wonder if Google didn't make this deal because they didn't want to have a big drop off in revenues which would take some of the bloom off that rose, or, in the words of bill, end the honeymoon phase.
I'm thinking this might have something to do with AIM. As the big I.M. providers start to move into VOIP, I.M. market share has suddenly become valuable.
Buying into 5% of the company that dominates the I.M. field, might just be worth 1 billion.
Other issues:
Google draws $480 million from placing ads in AOL. Under the current deal, that's 20% of the ad revenue.
Which means AOL is making $1.92 billion from those same ads.
Now add in revenue from their subscriber base.
Revenue from other ad streams. (Anyone here fired up AIM lately and seen the barrage of advertising that results?)
Revenue from "premium content" charges.
And on and on and on....
Plus the cloes ties to Time/Warner content. There's an absolute Gold Mine of content to be delivered from Time/Warners massive and deep inventory of copyrighted material.
$1 Billion for a 5% stake doesn't seem like that bad a deal.
Which is a shame. I wouldn't have minded seeing Google getting a bit of a bloody nose. I'm really sick of seeing a one search engine market.
I.E
all AOL subscribers get free broadband internet access on the move ,
also could AOL email be used to deliver adsense similar to GMAIL
Plus quick entry into IM with associated benefits
Plus as many have said the loss would have cost G's bottom line heavy and markets would have downgraded stock
Still I do not think it is a cost effective way to spend 1 billion dollars , and MSN were much cannier than many give them credit by forciing the price up this high for although G may feel they have won the battle is the cost so high that they could lose the War
steve
