22 Comments

Summary:

As part of lunch conversation yesterday, a very smart man savvy in the ways of the Internet joked that AOL might be the black widow, that kills its mate. The blogosphere this morning, it becomes even more evident that the people are downright pessimistic about the […]

As part of lunch conversation yesterday, a very smart man savvy in the ways of the Internet joked that AOL might be the black widow, that kills its mate. The blogosphere this morning, it becomes even more evident that the people are downright pessimistic about the potential impact of Google buying 5% of AOL, a division of Time Warner. (Actually given all the settlements, and other deals, like this most recent one, Time Warner might have made more money off beleaguered AOL that it seems. Anyone remember the $750 million settlement with Microsoft back in 2003)

AOL, by the way continues to be the king maker in the Internet space, despite its troubles. I think many, scratch that, almost all have focused on the advertising aspect of this deal. In my mind, this is a deal which has larger strategic implications. The first – the instant messaging. The two companies explicitly state that they are going to interoperate their IM networks. For Google’s GTalk, this is a big boost, something it needed desperately in order to increase traction when compared to Microsoft and Yahoo. The IM alliance between Google-AOL is a good way to combat Microsoft-Yahoo IM combo.

Wait, there is more…. Google had announced major voice-related announcements to the Jabber platform via its Jingle project.

With the release of Libjingle, the makers of these clients will be able to add the ability to make and receive calls between their clients and Google Talk. In fact, they’ll be able to support calls between their clients and ANY OTHER clients that support Libjingle .

An interoperability between the two IM networks could soon be enhanced to facilitating between AIM and GTalk users. Add to the mix, other SIP based clients that can talk to GTalk, such as Gizmo Project, well there is an informal VoIM network that starts to form. Google is very ambitious about Gtalk, and I can bet they are working on developing a bigger ecosystem than most people realize. From get go, they it seems worked on the premise that voice is worth “zero” in some situations. Despite appearances, there might be a method to their madness.

The second aspect of investing in AOL – video. Google stands to make a lot of money from video advertising over the Internet, as my dear friend Cynthia Brumfield has pointed out. They have been fighting an uphill battle to find a toehold in Hollywood, and well there is no one more old school Beverly Hills than Time Warner. I think this will be the thing that helps the company get some traction for its Google Video business.

Some have expressed their chagrin at flashing ads, or whatever. Well, Google wasn’t going to try and do a portal. They did. So deal with it and move on. In the end $1 billion in AOL will pay for itself, because Google will be selling a lot of ads on the AOL properties. And if nothing, its a hedge against Microsoft.

The deal terms…

* Creating an AOL Marketplace through white labeling of Google’s advertising technology – enabling AOL to sell search advertising directly to advertisers on AOL-owned properties;
* Expanding display advertising throughout the Google network;
* Making AOL content more accessible to Google Web crawlers;
* Collaborating in video search and showcasing AOL’s premium video service within Google Video;
* Enabling Google Talk and AIM instant messaging users to communicate with each other, provided certain conditions are met; and
* Providing AOL marketing credits for its Internet properties.

  1. Will Google-AOL help consolidate IM?

    It may be nothing but a footnote to the Google-AOL deal, but to me (and others like Stowe Boyd at Corante and Gary Price at SearchEngineWatch) the proposal to blend GTalk and AIM into a seamless instant messaging service is the icing on the cake &#821…

    Share
  2. One thing that I think people overlook about AOL is its 20M users who are, let’s say, not that discriminating. If you are interested in getting your new product/service out to an audience other than early adopters without a lot of advertising, an alliance with AOL is a good way to go.

    Share
  3. Google compra 5% da America Online

    Em um acordo envolvendo US$ 1 bilhão, a Google acaba de adquirir uma fatia da America Online, ou AOL. Com isso, fecham-se as especulações sobre quem levaria parte da empresa que estava sendo também avaliada pela Microsoft. O acordo inclui…

    Share
  4. Talking about AOL users, they rock! …Talk to any internet marketer and almost everyone would say they are the best converting demographic in the internet (except in the b2b space)…

    Share
  5. Google is no doubt a great search engine and a brand but they will face intense competition.
    Check out https://chitika.com , I like their style of banners and also check out advertisement marketplace http://www.adbrite.com/ Their will be 50 such companies offering cut throat competition. Not to forget the old Wall Street advertisers who are hungry to BUY these companies.
    Google must look beyond advertisements to keep its skyrocketing stock escape the orbit($290 Billion, MSFT market cap)

    Share
  6. Also i hate when armchair marketers blog around predicting Google is going to show banner ads in SERP’s (search results pages).

    Banners are the worst way to monetize a SERP,period …The best CPM google may ever get for a banner ad would be around $5 and it pales in comparison to the CPM generated by text ads on SERP’s

    But said all this i think there are some parts of the google property where banner ads can fit , like for example the Google image search (where CPC text ads will have the worst click thro rate , sit its better to monetize with CPM based banners).

    Google News is also a good place for banners but they will have a legal nightmare if they try to monetize it …

    Share
  7. gopi, great point in the last comment. i agree. google maps, google images, google video and google news could be the right place for image ads. by the way, i don’t understand why people think that google will do boneheaded things, and why AOL will kill the golden goose. the messed up once before, okay make that twice before, but this is a slightly more enlightened company that faces “lights out” if it messes up.

    Share
  8. My mother in law uses AOL. She has a cable modem but insists on keep AOL as her email address and she likes to use AOL because that’s what she’s used to. She uses the AOL browser. Anyway, she informed me a few days ago that AOL’s search is poor in comparison to Google’s search. I didn’t have the heart to tell her that they were one in the same. I think she was trying to tell me that she likes the clean Google UI. I found the exchange hilarious and instructive. Google has built a brand based on clean, fast, and high quality search. It’s a real brand with loyalty. They can’t abuse that position, but it is the core meaning of the brand to the average user.

    Share
  9. Good points Om,i guess Google News would be their second largest inventory after search but legality will be a main issue in monetizing that…

    Share
  10. [...] The firms say Google will become the only shareholder in AOL other than Time Warner. Story all over the net and on tech.memeorandum. [...]

    Share
  11. Should be the AOL-ification of Google…

    Share
  12. Without offending anyone, I would like to point out that lotsa old people love AOL. My colleague told his mom didn’t let him upgrade her ISP to broadband and told “No please don’t touch the setup, everything is just working fine”. She probably doesn’t wnat to go through the learning curve. Reminds me why 50% of the VCRs in the world flashed 12:00.

    Contradicting to Gopi, are you going to throw ads on my content(news) on your website ? You will have too many enemies to fight then.

    Share
  13. AOL own ICQ as well.

    Share
  14. [...] while google is celebrating microsoft on the other hand has taking a hit. they have enough cash to build out their technology and attract other partners it does sting. [...]

    Share
  15. [...] Om Malik thinks that Google buying 5% of AOL has larger strategic implications than Advertising: [...]

    Share
  16. >> Contradicting to Gopi, are you going to throw ads on my content(news) on your website ?

    Khabri, thats why i posted previously that it will be a big legal nightmare if they try to directly monetize Google News…

    At present Google News is a loss leader for them and it will be very interesting how they will monetize it!.

    Share
  17. [...] Om Malik commenta gli aspetti strategici della recente operazione con cui Google ha acquisito il 5% di AOL, una divisione della Time Warner: [...]

    Share
  18. [...] Hey AOL, You Got Googled Dec 21st, 2005 (17 comments) [...]

    Share
  19. honestly, i think that google’s next step should be getting involved with Apple and financially supporting or buying up the mozilla/firefox projects. with that much weight behind them, and apple with their new power from the intel chips, they should do QUITE well at toeing up with microsoft.

    Share
  20. [...] Malik, Thursday, April 10, 2008 at 6:16 AM PT Comments (0) Back in December 2005, Google paid a whopping $1 billion to buy 5% of AOL from Time Warner. That valued AOL at a whopping $20 billion. [...]

    Share
  21. [...] AOL was being valued at $10 billion as it was being prepped for a sale. At the time Google made an investment in AOL, its estimated value (as per deal terms) was $20 billion. Some people believe that AOL is worth [...]

    Share
  22. [...] PT | 0 comments In December 2005, Google bought five percent of AOL, a division of Time Warner for about $1 billion. The impetus of the deal was to keep AOL and its traffic out of the reach of Microsoft and Yahoo. [...]

    Share

Comments have been disabled for this post