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Tuesday, December 06, 2005

AOL Says Bye Bye Google But Embraces Microsoft

WSJ scoops that Time Warner has decided to partner with Microsoft in online advertising. After months of yes-no, no-no, yes-yes discussions, the two biggies are about to announce a deal that would combine advertising-related assets – with very limited dollar changing hands.(Why should it take so much time to finalise?). The article also adds that an agreement is expected to be struck sometime before year-end, but it is still possible that AOL could choose instead to deepen its relationship with Google at Microsoft's expense. Key points:
1. AOL will drop Google as its primary provider for search and use MSN instead (Last year, Google turned over $300 million in revenue to AOL).
2. AOL and MSN advertising-related assets will be combined in a JV with little or no dollar transactions involved.
3. A joint ad sales force will be created to promote the new entity & 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/ enter into a cash outflow transaction with in AOL.
6. A firmed up announcement of the deal by the third week of December.
As I wrote earlier,the real revolution is the ability to affordably reach small markets. AdSense & other online advertising networks can create provide a new form of instant revenue & monetization for startups Some one wrote Technorati’s main revenue stream is Google Adsense. On the whole a good development for Microsoft & Time Warner – if it fails to take off – Google would benefit a lot more – if it clicks google will have a significant competitor, but the impact may still be limited. What I am wondering is - servings ads is no rocket science , these two are forced to come together to meet competitive pressure and am still surprised as to why it should take this much time to firm it up - particularly when cash involvement and impact looks very minimal.

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