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Saturday, December 17, 2005

AOL and Google

The battle was on for the hearts and mind of AOL and its 20 million members.

 

The  winner was Google although they're not the only ones who will benefit if this deal succeeds. In return for a billion dollars Google gets a 5% share in AOL.   Google will also continue to be the search engine of choice for AOL 

 

The real winner will be AOL. A billion in cash is great Christmas bonus and it couldn’t come at a better time for budgets at AOL.   AOL has been struggling with how to roll out content to the non-AOL internet. The exposure by Google will make it possible for AOL to make this transition. In return, Google will benefit from the rich content which includes a huge video library ripe for indexing.

 

As part of the deal, AOL will also get exclusive rights to sell Google ad space and keep a percentage of their revenue.  AOL with its acquisition of advertising.com and others already has infrastructure in place to sell ads and now they have more locations to put them. Both companies will benefit from the steady source of ad revenue.

 

The most promising part of this new arrangement is both AOL and Google are on equal footing. Their corporate and  low level management are more compatible then most recent mergers including the AOL Time Warner marriage.  Both companies respect each other so we should expect to see more agreements from other units within the companies.

 

Google wins because it gains a stake in solid established asset. Google could also be a real winner if it learns from AOL's mistakes.  AOL became the poster child of companies whose value on paper and perception exceeded their assets and they let it go to their heads. AOL grew cocky and missed out on many lucrative relationships because they got too big for the britches.  Google is currently the industry darling and could easily make some of the same mistakes. Google will be experiencing many of the same growing pains like; How do you deal with employees who share a cubicle when one has 5 million in stock options, mostly exercised and their co-worker, hired a month later is still living on a regular paycheck.

 

The consumer could win if AOL takes some lessons from Google.  Google has won favor by keeping their ads simple and not detracting from the content. They also have one of the best disclosure policies in the industry when it comes to installing software. I'm hoping this will rub off on AOL who still hides their Uninstall option under their Help menu.

 

Microsoft is certainly the loser.  AOL has never been happy with their treatment by Microsoft and this deal surely tastes sweet in Dulles and really sour in RedmondThe consumer could lose if Microsoft overreacts.  Microsoft is becoming very ad-centric in their thinking and could push out some very annoying ad supported concepts that consumers will be forced to swallow.

 

 AOL and Google News

 

 

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2 Comments:

Anonymous Anonymous said...

good article, I personally am thrilled that aol and google have an agreement, in my opinion microsoft would have just messed up AOL and caused its demise.

11:40 AM  
Anonymous Anonymous said...

i completely agree.

Another Microsoft acquisition would not be good for the software developer community on a whole, as they currently have too much industry power and clout as far as i am concerned.

1:46 PM  

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