The Craziest Thing About The Google/AOL deal Options

[SearchEngineNerds]

"Finally, around 9 p.m., Richard D. Parsons, chief executive of Time Warner told Eric E. Schmidt, chief executive of Google, that he would accept Google's recently sweetened offer. Google, which prides itself on the purity of its search results, agreed to give favored placement to content from AOL throughout its site, something it has never done before." (New York Times)

This sets a very dangerous precedent where bigtime adsense players can say increase my rankings too or i'm switching to yahoo ads.

[earlpearl]

AOL has been the largest supplier of income to google outside of google itself. I read G's financials...I think last quarter they were responsable for about 10% of revenues (if I remember correctly).

It also appeared AOL kept a large % of revenues...but it wasn't specific through the financials.


It would be expected that they would work a special deal based on volume and AOL would retain better share of revenues than the average Adsense client.

With that deal google keeps those revenues from migrating to MSN.

Meanwhile I'd bet that larger adwo0rds ads will result in larger revenues for google...and I'll bet higher competition for placement...all of which will make up for the higher % of revenues they give to AOL.

One thing about G on the web...they have managed to stay steps ahead of MSN every step of the way so far.

Dave

[Ruud]

That NY Times quote suggests messing with organic search. Via MSNBC it reads differently:

The deal also includes the promotion of AOL content through Google's paid search.

What is interesting is that besides paying twice the market value for a 5% sharehold, Google is giving so much control to AOL:

Under the proposed new deal, AOL will be able to sell the search ads too, plugging a gap in its offerings to advertisers. In addition, AOL will sell display ads on both the AOL and Google internet properties.

It's nice to have some news from the non-SEO world though. Here we are considering Google to be the modern giant, and there the giant is brought to its knees.

[kensplace]

Somehow I think google knows what its doing on this one.
I havent got a clue what it is, but Im sure they do

Call it a gut feeling.

[earlpearl]

I read a "hard copy" NY Times article on the agreement. Don't have the web reference in front of me.

John Battelle is cited as mentioning that the G/AOL agreement and its components "...each of them represents a step closer to a slippery slope".

Evidently some part of this agreement infers that AOL content will be incorporated into google rankings. Per the article, MSN balked at this element of the negotiations.

The article referenced many other elements of the negotiations, which went down to the wire with both G and MSN reps at Time-Warner Hdqtrs.

Toward the end of the article it mentions that expected G revenues from AOL ads should be about $500 million with $430 million reverting to AOL. That is a much higher ratio of revenues returned to the host than Adsense.

Finally a fund manager pointed out 2 points on the transaction.

$1 billion is chump change to Google and it "makes life difficult for MSN"

Big business!

From a search perspective it may well tend to distort google's algos to better reflect and better rank AOL content. BE AWARE!!!

Secondly I suspect that the larger adwords fonts will increase google revenues very quickly...especially in the midst of the Christmas season.

Dave

[JohnMu]

Somehow, I can't imagine Google chaning its normal search algorithms to rank AOL content higher. They could have made big $$ offering this earlier (pay for better rankings) to everyone (like some other search engines) but have always refrained from doing so... Perhaps they mean something else? (scratching my head)

[neosite]

Google already has a close relationship with Firefox, now they are even more deeply involved with AOL.

Firefox is behind IE. They could easily benefit from more exposure through G.
AOL is losing dialup subscribers as broadband becomes more popular. They could really benefit from being tied into G's investment in dark cable, internet through powerlines, mobile phone integration and Voip.

Once you toss these 3 together, you have something very interesting going on.

Meanwhile of course, google maintains hundreds of millions of dollars of revenue coming in and keeps MSN out....

....A billion dollars spent here will cost MSN easily twice that as they (MSN) are stuck behind the ball...

It all sort of reminds me of the cold war as the US outspent the USSR....

"Mr. Gates Open (source) that Window!"