RSSGoogle Deal Not So Sweet for AOL
By Ed Oswald | Published December 23, 2005, 11:48 AM
Google has taken some time to dispel concerns about its expanded partnership with AOL. With the clarifications, however, it now looks like the deal was not so sweet, with the only real positive for Time Warner's online unit being the $1 billion dollar investment by the search engine.
Google vice president of search Marissa Mayer posted the clarifications to the Google Blog on Thursday night. "The recent announcement of the AOL partnership has been the source of a lot of rumors and misconceptions. We'd like to clear some of those up," Mayer wrote.
In exchange for the investment, Google effectively closed out competitors -- something vocal company shareholder Carl Icahn publicly warned about -- and it now appears it gave AOL very little in return.
Google said that rumors of possible favoritism toward AOL-based sites in its results were untrue. Mayer said that business deals never affect search results, and if a site is listed high on a page, it is simply a better answer to the search query.
AOL's pages would also receive no special treatment in the way they are indexed, as Mayer said Google would work with the online service in the same way it does with other companies to help them catalog their pages properly.
Mayer also worked to clarify several points over the proposed advertising deal. She appeared to throw cold water on rumors that AOL had successfully pressured Google into using graphical ads on search engine result pages.
"There will not be crazy, flashy, graphical doodads flying and popping up all over the Google site. Ever," Mayer stressed.
Google would also not give AOL preferential treatment in Google's AdWords program, saying it did not do that for any of its other partners, and it would continue to advertise AOL in the "onebox" feature at the top of its pages as it had in the past.
But John Battelle, author of "The Search: How Google and Its Rivals Rewrote the Rules of Business and Transformed Our Culture," questioned Mayer's claims.
"I've negotiated with AOL. And talked to a lot of folks who have. And Microsoft pushed hard to win this, very hard," he said. "I find it difficult to believe Parsons and Miller settled for "help us get smarter about how to be indexed by you, Google. Thanks very much."
Added Battelle: "There's something else going on. If there's not, well, OK then. Then AOL is deeply, deeply lame. And, honestly, so is Google, because it seems to me that before you decide to go scan every book in the world, you might drop a dime to your most important partner, and ask if you can help them index their content as well."
Hmmm let's see what Google got from the deal shall we.............
* AIM/GTalk Integration:
This as a strategic positive given AIM's market leading penetration and the existence of a Yahoo!/MSN instant messenger integration partnership. We also believe that AIM/GTalk integration positions Google to roll out a more compelling VoIP offering that can build on the community of AIM users and the technical innovation of Google.
* Video Search:
The partnership calls for collaboration on video search and showcasing of AOL's premium video service within Google Video. One might believe that partnering on video search could vastly improve the quality of content on Google, with access to Time Warner content. Currently, AOL video search is among the leading video search services because it has access to quality content from Time Warner.
* Display Advertising:
The partnership expands display advertising across the Google network. While we believe that Google will maintain the sanctity of its home page, it may begin testing display ads across certain parts of the Google network of sites. These ads may include banner ads, graphical ads or rich media ads. We are cautious on this component of the strategic alliance as much of Google's success in acquiring search traffic and increasing monetization has been a result of the focus on the user experience and unobtrusive advertising.
* Direct Selling of Advertising:
The partnership allows AOL to sell search advertising directly to its advertisers on AOL owned properties using Google's advertising platform as its foundation. This will allow AOL to build its own advertiser base while Google, using Google's infrastructure, allowing both sides to benefit.
so overall i think it was a great deal for google.
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|interesting that an asset of a company that is selling at a 90% discount to its original deal peak suddenly has an asset that a laser-smart company like google thinks is worth $20 billion dollars..more than likely, google has purchased a 3-year call option on the success or lack of by time warner to navigate the tricky media/communication world that will be facing it in the coming years..if google perceives an asset that suddenly becomes more valuable to them, than they will exercise their option and buy more or take the entire asset..nevertheless, microsoft has been relegated to the cheap seats for the time being as google charts its way up the slippery slope of dominant internet leaders....the next three years should be interesting especially if google slips......
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|Google will slips. If it's stock price continue going like this, even at 30% a year for the next 3 weeks, it's market cap will be greater than MSFT. It's PE is 5 times MSFT and almost 3 times YHOO. Once it's bubble burst, it will drops to 2/3 of it's value.
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|When you think about it, with Google's corporate motto of "Do Know Evil" it makes sense they partnered with AOL.
The Computer Rodent
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|"it now appears it gave AOL very little in return"
Huh ? One BILLION dollars is "very little" ?
The Computer Rodent
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|Google will never see that one billions dollars again, either.
This was simply a one-upmanship contest with Microsoft.
Had Google been smart, they would've helped Microsoft piss away a billion bucks investing in the losers at AOL.
The Computer Rodent
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|Not see that money again? All they gotta do is sell the stock-- & they've really lost no operating cash, as they can easily get a margin loan on the stock holding.
Actually, none of that billion will go thru Aol's hands.
See, here-- Google really gave no money away('cept for any possible dip in the share price), nor Aol got any.
This is just part of TW's desperate campaign to pump up Aol value preceding the inevitable sale of something that it not only has given up on, but that is diminishing progressively in value. Having a deal w/ Google hopefully lends it perceived added value, positive PR(to the neophyte public), credibility.
I wouldn't be the least bit surprised to learn that in exchange for this, Google demanded & received some kind of profit gain / investment loss guarantee( vis a vis Aol share price coming down), right of first refusal and/or extra portion of proceeds in any future sale, etc...as thrifty Google is not reknown for spending money unwisely.
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|Please, oh learned one, tell us how AOL is a loser. Bet you can't say one thing concrete or substantive.
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|I bet Google insisted AOL now be called GAOL and pronounced GAY-O-L
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|Some of you are missing the point this article makes...
For starters, Google- the company that does no wrong- just engaged in predatory, anti-competitive practices. Those of you who don't see this as a problem better never say another word against Microsoft, lest ye be judged as a hypocrite and an idiot.
Second, their stake in AOL forced them to compromise on their previous attitude against video/ graphical ads.this means customers are going to see even more ads.
The other compromise, by AOL, is that Google Talk will nowbe interoperable with AIM. That may sound good, but AImis bloated enough without Google Toolbar, etc. and do we really want Google- given their desire to search index everything- to have access to our conversations? Just look at Gmail's ads... I can see that being our future IM experience.
Don't get me wrong folks, I like Google, because I like the competition for Microsoft, but I do view them as dangerous.
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|" Google- the company that does no wrong- just engaged in predatory, anti-competitive practices. Those of you who don't see this as a problem better never say another word against Microsoft, lest ye be judged as a hypocrite and an idiot."
Where the hell did you get that???
"Second, their stake in AOL forced them to compromise on their previous attitude against video/ graphical ads.this means customers are going to see even more ads."
Complete BS. No banner ads, no graphic ads...direct from Mayer, in this very article, no less.
" Just look at Gmail's ads..."
If you don't like them, you're not forced to use their software. Why does no-one understand this?
".. I do view them as dangerous."
Again, what have they done? How was this hostile or predatory?
You make a lot of accusations with zero backup.
Please illuminate us....
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|I agree to your answer to that stereotypical liberal rant...
Gooogle is not stupid, & is the last company on Earth to foolishly burn money-- whatever it does is because of convenience... and anyhow, it is already so beyond search & into future products & projects that will of their own bring increased traffic & revenue...
It doesn't have to fear competitors-- it's on warp speed, enroute to unkown galaxies...
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|Microsoft has no lack of talent in their army of developers and businessmen. And of course, from time to time they do buy out some of the best talent around (practically everybody has a price-tag, even Linus Torvalds).
I hope I'm not gonna burst a bubble here, but let me just say that nothing Google does is the absolute best - neither is MS or Yahoo or anyone else. There's plenty of room for improvement and leapfrogging each other with advancements (healthy competition).
Personally - I already know how a real-good(TM) search engine will eventually operate, and it's nothing like anything any of these folks make it work today. It will one day work this way:
1. Strong integration in the browser and OS, meaning the browser will actually keep track of your search keywords, what sites you checked out (and closed within X amount of seconds meaning it was CRAP in your opinion) and what you bookmarked (meaning it was GREAT in your opinion).
2. Favorites and usage of favorites (how often you visit sites - how much time spent on those sites etc) will be stored on a server. A fingerprint of your "taste"/interests will thus be made.
3. Oh yeah, every song you play, movie you watch, TV show, Amazon/Newegg purchase, phone call made/received (#+duration), open windows/software you have running (+duration), maybe even every Walmart receipt (j/k...) etc will also be logged (on your request) anonymously (through open-source anonymizing/encryption technologies).
4. A not-too-complex algorithm will be able to digest all this information and:
a. optimize search results for keywords based on how many actual real ppl (NOT spammers) saved the resulting page for future reference, or spent the most time reading it (even without bookmarking).
b. you will be able to see "what others bought/listen-to/watched" which will be similar to what you are BUYING/LISTENING/WATCHING RIGHT NOW. So if you listen to 10 songs of a particular mood - you'll get perfect recommendation for more of that exact type and further, that exact taste WITHIN that type. Better than Pandora/Yahoo Radio/Amazon/Netflix recommendations.
c. you will be able to hook-up with those individuals with same tastes as you - for purpose of anonymous[a-la tor] p2p (or rather peer-to-group) file-exchange, get MASSIVE discounts (just imagine if you can easily locate right now everyone who is about to purchase an AMD A64 2X 4400+ CPU and with a few mouseclicks get a group discount for all), etc.
d. anything you will be willing to log about yourself will assist YOU to get recommendations from others doing about the same exact thing you are doing (calling overseas, running Maxthon, developing in Java, whatever) RIGHT THIS MOMENT (or in past few days -whatever).
This of course requires a mindshift from the commonly held opinion that privacy cannot be preserved by logging every aspect of your life. It can. There are technologies that can do that right now, they're just not commonplace, yet. MS will help with their push for secure-chip doing encryption in hardware. This has huge, infinitely useful ramifications, making us all HAVE to pay for future software which will either drop MS prices by 80% or usage of open source stuff will explode - both are great outcomes for everyone involved - I personally as the biggest hmm non-paying user of MS products can tell you it wouldn't matter to me either choice cuz again - open source, too, can become "good enough" very quickly if the masses start embracing it).
To end this long sci-fi story, I'll just return to the original point - Microsoft has a lot of talent in their hands and they just need to utilize it better (and they will once they get rid of the legacy systems monkey on their back hehehe). They also got too much cash that they need to spend on bringing MORE talent on-board. Regardless, IMO MS has the ultimate weapon for winning all mini-wars (browser, IM, search-engine, dbase, ecommerce) - the user's OS. They don't have to have the best solutions - it's enough for them to be..well.."good enough".
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|Yes, MS has the OS-- but if they're not careful, they'll lose that tenuous hold.
Why? Two major reasons:
First, performance: Windows lags far behind in 64bit performance to other OS'es.
Second-- for this one let's backtrack to the days of 486 processors to see the repercussions & ramifications in place both to this day & the foreseeable future:
way back then, MS reneged on compiling Windows for the Risc processor(& sticking us with the much inferior-class impending Pentium), turning its back on the Risc consortium--which fast forward to this day, a subgroup of it now has the Cell processor... It's like combining 4 each of the best from AMD & Intel into a single one: it's multi-core(8!), multi-threaded, AND faster while using less power.
The only thing holding it back is, well-- it needs a mainstream OS coded for it...right now there are only plans to use it for next-gen game consoles. There are only a couple OS being ported to it: one belongs to IBM, the other to open-source Linux.
So one can infer that today, after years of having collaborated w/ the Risc consortium, it would have naturally progressed to the Cell processor...in such a case NO ONE else would have a snowball's chance in hell of even beginning to dent its market dominance for the foreseeable future. As it is, the chance is still small-- as there are no imminent plans for porting this breakthrough processor to desktops-- but it's a chance nevertheless: the rear door is now not totally bolted, and has been left cracked open a tiny bit. Though not ajar(& it's not even the more-visible front door either) and with the small chain still in place-- this now gives someone who can muster enough momentum & presence of mind, the opportunity to force the door open & barge their way in...& the barbarians are at the gate...
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|I agree that there's always a chance to beat Microsoft - even right now if someone gave me a well-subsidized Google PC (say running those Cell CPUs and Linux) I'd actually buy it and use it even for one or two applications (video editing, gaming, tivo on stereoids [HDTV+DVD archive], PBX-VoIP, etc). Meaning I won't spend what it's really worth ($900+) but would definitely spend $199 on it! The rest Google can subsidize for the "chance" of grabbing a decent chunk of the OS market (20%+).
Thing is, no sane company will take that huge risk. It's gotta be a consorted effort by everyone drooling over MS's OS success. And those companies don't have too much cash to throw - most are in survival mode (strategy=baby steps). Perhaps the Chinese or the EU will have a decent answer - as (a collection of) countries they can spend much more than MS on building a competing OS and actually getting people to use it (by force, by brainwash [national pride], by law [taxing MS], by subsidizing, or simply by making a better OS in all regards [including 95%+ compatibility with WinXP software and 95%+ hardware-drivers]).
But, as you and I apparently both agree and believe - it's all a dream. It's not gonna happen ANY TIME SOON.
Merry Christmas
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|From what I see, AOL still made out in this deal...
AOL uses Google as a search engine
AOL Makes 1 Billion
Google gets 5% stake in the company.
What did either company loose in this deal? Absolutly nothing from what I can see...
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|You mean Google paid AOL $1 billion dollars for a 5% stake in the company, and all AOL got was $1 billion?
Awwwwww... That's ripping my heart out. Seriously.
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|Sucks to be AOL...only getting 1bil.
YEah, I'd hate to be in their shoes.
Let's see...
Get nothing | Lose nothing
Get 1bil | Lose nothing. (and get your content a chance at actually being viewed by those not on the AOL network)
Yeah, they *must* be stupid.
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|Ahh.....now it comes out.
This article should be titled "Google pays AOL not to partner with Microsoft.".....because that's exactly what happened.
Google is still the devil.
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|If it's in their best interests, why not?
Happens in business all the time. MS does it too.
'Bout time Google got into the game.
;P
Wait...does that make me the Devil's Advocate?
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|Exactly... what is it people complain about Microsoft? Oh yeah! That they block out competition. Ah, the hypocrisy of this wreaks!
Oh and to the individual who posted early in the week thatsaid listening to Carl was stupid... yeah, failure to listen to your shareholders is always a stupid plan.
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|ummm..I believe it does.
It also makes you a hypocrite.
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|The ONLY benefit is an influx of 1 billion dollars for a service that they were already providing? Any day you want to give my company ONLY that benefit, let me know. They were paid off not to partner up with MSFT and they made a cool billion dollars for their partnership.
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|That sounds great but what if MS had decided it wanted to buy a stake in AOL for like $20 billion. Would you still take only $1 ?
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|Well Google basically bought 5% of AOL stock at market value for $1 billion.
If MS wanted to spend $20 billion, they would be buying AOL (unless they are incredibly ignorant and just spent $20 billion that would not give them ownership), and then it would be to the stock owners to decide whether that would happen or not.
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|They were in negotiations to purchase AOL. or at least a controlling interest in it.
Other then a large cash infusion I don't see the real benefit to AOL. Do they still think that can compete in the market? Time Warner would have been better off selling AOL then doing this deal. And at this point I don't see rival companies wanting to purchase AOL. Unless Google steps up and continues to purchase more and more of AOL over the next few years.
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