The rumor mill banked on Time Warner announcing an investment deal for AOL before Christmas…but the rumor mill also banked on an AOL-Microsoft deal. With less than four days to go before December 25, Time Warner announced the victor in the high-stakes bid for AOL and the winner is Google. Actually, the real winner is Time Warner, which gets:
— $1 billion from the Mountain View search giant for a 5% ownership stake
— the rights to sell search ads using “white label” Google technology
— the ability to make AOL content “more accessible” to Google’s web crawlers
— a highly skilled partner to work with on video search
— distribution of AOL video content via Google Video
— interoperability between AIM and Google Talk (a new deal point not revealed in the voluminous press leaks leading up to this announcment)
— $300 million in advertising on Google’s properties
Google gains something in the sense that it didn’t lose AOL’s business and, more importantly, it didn’t get bested by Microsoft. But the chatter points to a chink in Google’s armor. Alan Murray in the Wall Street Journal calls AOL’s demands “ransom” and, like others, worries that this means Google is now vulnerable to more demands by other partners and customers, a situation that could bring its sky-high stock back down to earth.
Shouldn’t that be a clear warning sign that Google’s costs of acquiring business are going to rise, and its triple-digit profit increases are bound to slow?
Another downside for Google: the perception that its agreement to make AOL content “more accessible” in the search results compromises the company’s vaunted and widely respected search algorithms. But in this AP article, Google CEO Eric Schmidt seems to be saying that Google will do nothing more than a little, well, search engine optimization with AOL’s stuff.
That arrangement already is raising questions whether Google will rig its algorithms so that AOL ranks higher in its search results — a prized position that Google has repeatedly said can’t be bought. In Tuesday’s interview, Schmidt brusquely dismissed that notion. He said Google just wants to ensure some AOL material that’s difficult to index, such as video, finds its way into the search results. “We are not giving (AOL) preferential treatment, nor did they ask for it,” Schmidt said. “I am making this clear: we will not let a business deal interfere with our search engine results.”
I believe Schmidt when he says Google will protect the integrity of its search rankings, but isn’t ensuring that content finds its way into the search results the same thing as giving AOL preferential treatment in the results? Google needs to start getting more specific about this aspect of the deal and explain a little better about this “more accessible” business.
Update: The Washington Post today (12/21) quotes Dick Parsons as saying that Google might help digitize Time Warner video content to make it more searchable on the web.
“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.
Cynthia Brumfield at 9:24 PM|Comments(0)
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