$1 Billion AOL Stake For Google Approved
By Yuki Noguchi
Washington Post Staff Writer
Wednesday, December 21, 2005; D01
Time Warner Inc. approved Google Inc.'s $1 billion investment in its America Online Inc. unit yesterday, a deal aimed at giving both companies a greater share of the burgeoning online advertising business.
Company executives also characterized the deal, which gives Google a 5 percent stake in Dulles-based AOL, as an opportunity to cross-pollinate Time Warner's vast media library with Google's highly profitable online advertising business.
As part of the deal, Google also will tap AOL's instant-messaging customer base of 43 million users, integrating it with Google Talk, a recently released product with far fewer users. That pits AOL and Google against rivals Microsoft Corp. and Yahoo Inc., which next year plan to integrate their instant-messaging systems.
Google will also be able to access more of AOL's content, such as music videos and television shows, through its media services.
"There are a lot of aspects of this deal that will have big impact," Google chief executive Eric E. Schmidt said in an interview. "What I like about this deal is that it has an end-user component and an advertising component" with benefits for both, he said.
For months, AOL was courted by Google and Microsoft, both of which wanted to capitalize on AOL's strong consumer brand and its affiliation with Time Warner.
Time Warner chairman and chief executive Richard D. Parsons said yesterday that the company chose to partner with Google because it was more familiar with how AOL's and Google's businesses could dovetail.
"We knew more about how to tease out the opportunities for both sides," Parsons said. Over time, the Time Warner-Google partnership may include digitizing Time Warner's television shows, movies and print news to make them searchable and usable by online viewers, he said.
AOL is already Google's most lucrative advertising partner, because it uses Google search on AOL Web sites viewed by millions of users.
AOL, which built its business in the 1990s selling basic Internet access to consumers, this year shifted gears and -- like Google -- is trying to capture a huge audience for free products so it can make money by selling advertising.
Jonathan F. Miller, chairman and chief executive of AOL, called the deal a "broader alignment" that in the short term will help AOL expand its audience and advertising market share.
The deal gives AOL more freedom in how it sells advertising that appears on its own sites, as well as on tens of thousands of Google-affiliated Web sites. The instant-messaging partnership will also drive more traffic to AOL sites, he said.
Billionaire financier and Time Warner shareholder Carl C. Icahn has criticized the Google investment, which was first reported last week. Icahn, who has been lobbying Parsons to spin off AOL, said the expanded partnership with Google would limit AOL's ability to merge with another partner later.
Parsons flatly disputed Icahn's claim: "Well, you know, he's wrong."
© 2005 The Washington Post Company
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