|
Time Warner enters into talks with Google
(AP)
Updated: 2005-12-17 09:48
Time Warner Inc. ended talks with Microsoft Corp. Friday and entered into
exclusive negotiations with Google Inc. over a $1 billion investment and a
broader advertising partnership with America Online, executives close to the
talks said.
The Google
headquarters in Mountain View, California is shown in this August 18, 2004
file photo. Google Inc. is in exclusive talks to pay $1 billion for a 5
percent stake in Time Warner Inc.'s online unit AOL, a source familiar
with the matter told Reuters on Friday.
[Reuters] |
Shutting out Microsoft sets the
stage for a high-profile agreement between two titans of the Internet. Under the
deal, expected to be announced as early as next week, Google would get a 5
percent stake in AOL, implying a $20 billion value for the unit, said one
official with direct knowledge of Time Warner's negotiating position.
Google, which operates the Internet's dominant search tools, also agreed to
highlight AOL's Web properties as sponsored links and integrate AOL's video
clips in its fledgling Google Video service. In exchange, AOL will continue
providing Google's search engine to its subscribers.
Officials described the negotiations on condition of anonymity because no
agreement has yet been formalized. The deal could be finalized next week, when
Time Warner's board meets in New York.
The deal shows that Google is willing to pay to preserve its lucrative
relationship with AOL and prevent Microsoft from becoming a bigger provider of
Internet search tools. A deal between Microsoft and AOL would have made
Microsoft's own advertising network more attractive.
The struggle over AOL reflects the larger competitive landscape between
rivals Google and Microsoft, said Internet analyst Scott Kessler of Standard and
Poor's.
The proposed agreement with Google gives AOL more flexibility to sell Google
search ads, and have them appear only on AOL sites. The online service currently
directs advertisers to Google and cannot limit search ads to its own sites.
AOL is Google's biggest customer, accounting for about $420 million, or about
10 percent, of Google's revenue during the first nine months of this year,
according to regulatory filings.
Most of the $420 million came from the ads Google distributes on AOL's Web
site. The two companies first began working together in 2002 when Google
wrestled away AOL from another online advertising network currently owned by
Yahoo Inc. (Nasdaq:YHOO - news)
Microsoft, which increasingly views Google as a fierce rival, has been
negotiating with Time Warner since early this year but did not propose any cash
investment in AOL, officials said.
Time Warner has been considering options for ramping up AOL's business
against a backdrop of criticism from financier Carl Icahn, who is demanding that
the company take drastic steps to improve its long-lagging share price,
including a massive share buyback.
AOL is shifting its business model from selling dialup Internet access to
selling online advertising, which is booming. Google, Microsoft and earlier
Yahoo Inc. all expressed interest in some kind of partnership with or stake in
AOL to harness its large reach among Internet users.
Microsoft and The Associated Press last month announced plans for an
advertising-supported online video news network early in 2006. Microsoft will
supply the technology, video player and advertising support to the network,
while AP's broadcast division will provide the video, which will feature about
50 different stories per day.
|
