The Wall Street Journal reported early on Tuesday morning that Microsoft and Time Warner were close to a deal that would form an online search and advertising partnership between the two companies. The deal would put the collaboration in contention with Google, who is also reported to have an interest in an alliance with Time Warner’s AOL unit.
Sources close to the matter had originally reported that Time Warner’s original discussions with Microsoft, Google, Comcast, and Yahoo! included the possibility of a sale of a stake in the company’s AOL unit. Billionaire investor Carl Icahn voiced his displeasure with Time Warner’s strategy and said that he would hold their board members personally liable if they made a deal that undervalued AOL. Since then, Yahoo! has dropped out of the running and Comcast is now seen as a potential partner with Google.
The Journal reports that under the discussed terms of the partnership, AOL would drop Google as its main Internet search provider and switch to Microsoft’s MSN search service. Microsoft and Time Warner are also negotiating to form a joint advertising sales force to sell online ads across both AOL and Microsoft’s MSN through a self-service ad platform that they would develop. Whether or not this would be a result of Microsoft’s AdCenter project (which is currently in its test stages), which is intended to be a self-service ad platform, is not yet certain. Both online advertising services would still remain under the control of their respective companies.
According to the New York Times, this deal would not involve Microsoft or Google buying a stake in AOL, as originally reported, and will instead focus on Web search and advertising, along with other possible areas of interest.
Google’s current contract with AOL is effective through a portion of 2006. Last year, Google’s deal with AOL generated $300 million for Google. Google received about 11% of its first-half revenue from AOL, who also has a share in the revenue generated by the search service contract.
A finalized agreement is expected to be announced sometime before year-end. The possibility that Google could end up winning Time Warner’s affections still remains.
Sources:
http://www.marketwatch.com/news/story.
asp?guid=%7BEF04780A-1C33-459A-A326-
7B94007BAB63%7D&siteid=google
http://today.reuters.com/investing/finance
Article.aspx?type=bondsNews&storyID=URI:urn:
newsml:reuters.com:20051206:MTFH65656_2005-
12-06_09-51-42_N06180684:1
http://www.tvweek.com/news.cms?newsId=9005
http://www.webpronews.com/topnews/topnews/
wpn-60-20051206AOLDumpingGoogleForMicrosoft.html
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