The AOL Deal, Nothing's Changed

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The AOL Deal, Nothing's Changed

After months of dancing with a number of potential partners, it appears that Time Warner has decided to keep things basically the same. They keep their search partnership with Google intact, on probably much better terms though. And they get Google to place a $20bn valuation on AOL.

They remain a second tier player along with Microsoft and they continue to go it alone.

This may be the best course for AOL. Time will tell. I certainly can't criticize the decision.

But a combination with Microsoft, whether total or partial, seemed to offer a number of tantalizing possibilities. A real third option in search, a power to challenge Yahoo! in CPM ads (banners, etc), and a traffic monster.

With this scenario, nothing really changes. Which is why this is a bigger victory for Google than anyone else, including AOL.

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Posted December 17, 2005 in Venture Capital and Technology

Comments

So you really think that AOL is worth $1,000 per user? Particularly considering how their user base is trending downwards?

Posted by: Jeffrey McManus | Dec 17, 2005 2:06:26 PM

Who cares about AOL anymore? This is a significant move for Google.

They started out claiming that advertising NECESSARILY corrupts a search engine in their original 1998 academic paper describing their indexing engine. Then, they created ad words only after convincing themselves that it would improve the searching experience while making them money. And they worked: no annoying ads, and the ads are better content than search results when looking for products.

So two questions:

1. How can this deal possibly improve a users search experience?
2. Why should Google care if AOL does a deal with M$?

Posted by: Michael Weiksner | Dec 18, 2005 1:09:29 AM

And they worked: no annoying ads, and the ads are better content than search results when looking for products.

I will agree with this, but via a different motivation for G. The result pages suck for organic results for product (tangible item searches) because that is what facilitates the big G's profit. If you are searching for an academic paper, it is better for G to give you better search results (serps) because PR wise it creates a better opinion about their algo as compared to other search engine's algos. Now when you type in 'ATN PVS-7 Night Vision Goggles' as a query you have a behavioral flag as a consumer (some might create 'prosumer' for the amount of money spent) what is the point of serving you relative organic search results? They know you know almost specifically what you are searching for. Some might even say it is best for them to serv the most irrelevant ads to direct you towards the ads.

I personally don't think this is a huge win for Google. They have been supplying results for AOL up until now. If MS picked this up (or Y!) it really would not have mattered in 5 years. yeah, more eyes is always better, but this piece of the pie is going to be up for grabs in 5 years again anyways, it just won't be searched through AOL it will be more broadmarket (GYM) searches as people gravitate towards dsl/cable/G-wifi.

Posted by: Cyanbane | Dec 18, 2005 2:17:51 AM

A VC

Musings of a VC in NYC