TELECOM Digest OnLine - Sorted: Time Warner to Sell 5% AOL Stake to Google for $1 Billion

Time Warner to Sell 5% AOL Stake to Google for $1 Billion

Monty Solomon (
Sun, 18 Dec 2005 09:30:18 -0500


Rebuffing aggressive overtures from Microsoft, Time Warner has agreed
to sell a 5 percent stake in America Online to Google for $1 billion
in cash as part of an expanded partnership between AOL, once the
dominant company on the Internet, and Google, the current online king.

At stake in this battle was leadership in Internet advertising, which
is a growing threat to other media companies. The loss is a blow to
Microsoft, which had sought AOL as a partner in its advertising
venture to undercut Google, its potent rival.

Though Google is only seven years old, its lucrative search
advertising business and its technical prowess could enable it to
offer consumers free software and services that would directly attack
Microsoft's core software business.

While the terms of the proposed five-year deal are largely set, it
will not be final until it is ratified Tuesday by the Time Warner
board, an executive briefed on the talks said.

Google has agreed to give AOL ads special placement on its site,
something it has not done before. Until now, Google prided itself on
its auction system for ads, which treated small businesses on an equal
footing with its largest customers.

By agreeing to change its business practices for this deal, Google
fends off what could have been a significant challenge from a
combination of AOL and Microsoft and cements its position as far and
away the largest seller of search advertising.

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