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AOL Drops Google as Search Provider

AOL Logo

According to an article in the Wall Street Journal (Subscription required), Time Warner has decided to partner with Microsoft on a new online advertising service that will be in direct competition with Google.

Here are some of the terms of the deal:

1. AOL will drop Google as its primary provider for search and use MSN instead.
2. AOL and MSN advertising-related assets will be combined in a JV with little or no money changing hands.
3. A joint ad sales force will be created to sell ads on MSN and AOL.
4. An automated platform will be created to serve ads to both sites (presumably for search, as AOL acquired Advertising.com to handle non-search-related ads).
5. Microsoft will not acquire an equity stake in AOL.
6. Deal to be announced in the third week of December.

Some may argue that AOL has become irrelevant given the fact that it is hemorrhaging subscribers. However, keep in mind that Google derived about 11 percent of its first-half revenue from AOL, and AOL’s portal continues to attract users.

This merger is also important given the fact that MSN will sooon release Ad Center, an advertising service aimed squarely at Google’s Adsense program.

Update 12/16/05: CNET is reporting that AOL has taken the Microsoft offer off the table, choosing to stay with Google instead. Apparently, Google is considering paying $1 billion to retain a 5% interest in the company.

Posted by Sean

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