Time Warner to Sell 5% AOL Stake to Google for $1 Billion


Rebuffing aggressive overtures from Microsoft, Time Warner has agreed to sell a 5 percent stake in America Online to Google for $1 billion in cash as part of an expanded partnership between AOL, once the dominant company on the Internet, and Google, the current online king.

At stake in this battle was leadership in Internet advertising, which is a growing threat to other media companies. The loss is a blow to Microsoft, which had sought AOL as a partner in its advertising venture to undercut Google, its potent rival.

Though Google is only seven years old, its lucrative search advertising business and its technical prowess could enable it to offer consumers free software and services that would directly attack Microsoft's core software business.

While the terms of the proposed five-year deal are largely set, it will not be final until it is ratified Tuesday by the Time Warner board, an executive briefed on the talks said.

Google has agreed to give AOL ads special placement on its site, something it has not done before. Until now, Google prided itself on its auction system for ads, which treated small businesses on an equal footing with its largest customers.

By agreeing to change its business practices for this deal, Google fends off what could have been a significant challenge from a combination of AOL and Microsoft and cements its position as far and away the largest seller of search advertising.

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Monty Solomon
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