It's been quite a while since the rumor mill started spinning about Time Warner's
According to reports, Google may offer $1 billion for a 5% stake in America Online. Seems like a lot of money for such a small piece of AOL, right? Yet the deal's true price -- for Google and its users -- may be even higher than its dollar amount suggests.
AOL may be getting the better end of this deal, according to a New York Times article. The company will get "technical assistance" from Google, so that AOL can build pages that will appear more prominently in Google's search results. AOL's video programming will get high placement in Google's video search; according to the article, this preference won't even be identified as advertising. Google will also highlight Time Warner's Web properties with sponsored links bearing AOL's emblem. (This will mark the first time that Google has allowed such logos to appear on its site.)
Meanwhile, the New York Times article also stated that Time Warner had asked Microsoft for "preferred placement" in its searches, which the tech giant apparently rebuffed, dubbing that behavior "unethical." Given Microsoft's prior legal scuffles, it's an ironic turn of events.
It's obvious why this deal meant a lot to Google. Google is the search engine of choice for AOL, and despite a considerable amount of recent subscriber defection, AOL's still a darn big community, with 20 million users. Time Warner is Google's biggest customer, accounting for about 10% of revenues.
However, chatting with my Foolish colleague Seth Jayson did bring up an interesting point related to Google's well-known mission statement: "Don't be evil." That won't get any easier as the company and its stock price continue to expand. Given the preferential treatment it will now provide AOL, it's not hard to imagine that Google's do-no-wrong reputation may quickly start to tarnish -- especially in such close association with AOL, which has committed a few previous blunders that arguably alienated some of its users.
It's a strange turn of events between these two companies, and while the short-term logic behind their expected agreement is clear, the far-reaching ramifications may not be. Google's share price hit a new 52-week high in Monday's trading (what else is new?), but personally, I see many reasons for Google fans -- and shareholders -- to feel uneasy as this agreement speeds closer to reality.
Further foolishness on the Google-Microsoft-AOL brouhaha:
- One Fool said AOL and Microsoft might not be such a crazy idea.
- Here's another opinion on the same premise.
- Relive the time when the news was new.
Time Warner is a Motley Fool Stock Advisor pick. Microsoft is a Motley Fool Inside Value selection. To find out more about our entire suite of newsletters, please click here.
Alyce Lomax does not own shares of any of the companies mentioned.
