Hey Google — You’ve got AOL!

by Mathew on December 16, 2005 · 10 comments

According to a blizzard of reports, starting with the Wall Street Journal and now including the New York Times, the Washington Post, and Reuters, Google is close to a deal to take a five-per-cent stake in America Online for $1-billion (U.S.). This, of course, is only the latest in a series of rumours about what’s going to happen to AOL – first Microsoft was close to a deal to buy the whole enchilada, then Google’s's name was brought up, then Microsoft was seen as being back on top.

At one point, the speculation was that Time Warner CEO Dick Parsons was trying to get the takeover rumours going so that he could cut a better deal with Google, which AOL uses to power its search results. Then AOL founder Steve Case came out with his impassioned plea to split up the company – the same thing Carl Icahn seems to want to do – in an op-ed piece in the Washington Post, which I wrote about, and which was hilariously satirized in a commentary piece here.

Most analysts seem to think that Google taking a piece of AOL – if only so that Microsoft or Yahoo don’t get it – makes sense. The former walled wasteland… er, garden is estimated to account for about 11 per cent of Google’s annual search revenue, and that wouldn’t be a good thing to give up. And it’s only a billion, right? Pocket change for a company with a market value of almost $130-billion.

Update:

Several people, including O’Reilly Radar and John Battelle, have noticed a potentially ominous sentence in the New York Times piece: “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.” Don’t jump the shark, says Battelle. Henry Blodget says it’s a good deal for Google, and a bad one for Microsoft. And Rafat over at paidcontent.org has a nice roundup of the various twists and turns this story has taken.

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  • http://www.stuartmacdonald.ca Stuart MacDonald

    Regardless of the competitive blocking, revenue protecting, MS losing etc. funsy aspects of this still-not-done deal, I soooo agree with John on the real spectre here. Preferencing aol, no matter how they do it, would put a bullet through their brand promise and call their worthiness as the repository of everything into serious question. The $1b is relative chump change; agreeing to an Indecent Proposal would be a colossal price to pay.

    Let’s hope it’s not true.

    - Stuart

  • Mathew

    Is it really that serious, Stuart? I admit, if Google starts providing AOL links high up on the page mixed in with the rest of a search, that’s a big problem — but it sounds like they’re planning to have them listed separately in a box on the lower right-hand side (below the AdWords ads, I assume), and clearly marked as AOL — is that really so bad?

  • http://www.stuartmacdonald.ca Stuart MacDonald

    Execution will be everything. A side box, clearly outlined like AdWords results are — and just as relevant — should pass muster. But, if they put a special dog team of Maximizer folks inside AOL’s offices to sprinkle bonus pixie dust that magically moves their unpaid placement from Number 1.752 million to Number 7 — ya, baby, that’s a Big Deal.

    - Stuart

  • Mathew

    I agree — it is all about how it’s done, and how it’s flagged to the user. If AOL crap… er, content seems to float magically to the top of all my searches, then I agree a flame war is in order :-)

  • http://www.stuartmacdonald.ca Stuart MacDonald

    Now now… they must have something to offer :)

    In fact, did you know that AOL.ca has climbed to Number Two in terms of reach on the Canadian web, per ComScore? I just learned that last Wednesday and was super surprised. 14 million monthly uniques to MSN-Sympatico’s 17 million (all numbers on a roll-up basis). With essentially no homepage-preset user base and a relatively recent open-doors content approach in Canada, this is darn impressive results, even allowing for the usual +/- 20% ComScore wobble. AOL US should be paying attention…

    - Stuart

  • Mathew

    Hmmmm… that is interesting. I wonder what would be driving that kind of traffic? I didn’t realize they were quite that big.

  • http://www.stuartmacdonald.ca Stuart MacDonald

    I was blown away when I learned it. They have apparently acquired some sites with strong traffic in specific verticals. I’d need to dig into the ComScore data to better understand it (and I don’t have a subscription anymore – how about a comp, Brent? ;)) and it is not impossible that this is a one-month-wonder (you used to be able to pop your MediaMetrix reach numbers for a one-time gain big time via pop-unders, promos etc. back in the day — less so now). But still noteworthy.

    Gifts to wrap.

    - Stuart

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