(UPDATE: The NY Times has a relevant article on the deal)
As the New York Times, the Washington Post, Wall Street Journal and other mainstream media report, it's over.
Google is apparently the winner of AOL's heart, with Papa Time Warner's glowing approval. After all, it puts a $20 billion valuation on AOL, at the high-end of any of the estimates put out by observers, subject to approval by Time Warner's board next Wednesday.
So, to paraphrase a well-known credit card commercial,
For Google, the price of acquiring a 5% stake in AOL: $1 billion.
Keeping AOL away from the maws of Microsoft: Priceless.
Or so it would seem after months of the quasi-public sales process Time Warner seems to have run with a little help from the mainstream media.
For Google, the deal represents both a defensive and an offensive play.
On the defensive side, it protects a 12% revenue provider in AOL for it's ad services, along access to AOL's traffic, "portal" driven content and community services, instant messaging and mainstream demographic customer base.
On the offensive side, it potentially gives Google a let-up in it's video services efforts, given that AOL has been investing aggressively on this front of late, with the recent Brightcove investment the latest example.
As the Washington Post explains it, the five year deal:
"...gives Time Warner the choice of maintaining its 95 percent ownership stake in AOL, or keeping majority ownership while spinning off a portion of AOL to shareholders as a way of boosting its stock price."
Furthermore,
"As part of the new agreement, AOL gains the right to sell Google-generated, text-based ads that appear on the AOL service. This change will enable AOL to sell all forms of online advertising itself to any company.
In addition, AOL's video service will get special promotion as part of Google's video offering. And AOL will have graphic ads that attract attention and appear alongside the text-based ads Google traditionally has displayed to the right of its free search results.
AOL will also be given a substantial fixed-dollar budget from Google to purchase advertising to promote the Internet service. Google's free search results, based on math equations that rank them according to relevancy, will not be changed as a result of the new partnership, sources said."
A lot is still unknown, including what options if any Time Warner retains in terms of spinning the whole company out before then, as founder Steve Case suggested only a few days ago.
From Time Warner's perspective, the deal represents a nice bone for the Carl Icahn wolf at the door, while it figures out what else to do about his other "demands". So besides a chunk of change to pay down debt, the deal merely buys it more time.
So while this deal brings to a close the heated "auction" for a joint venture with AOL, the bigger questions on AOL's future are far from being answered.
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