Time Warner Inc. is in exclusive talks with Web search leader Google Inc. about broadening a partnership with Time Warner’s AOL online unit, sources familiar with the matter told Reuters.
Microsoft Corp., once considered the front-runner for a deal with AOL, is — at least for now — out of the running.
Neither Google nor Time Warner spokesmen would comment. Microsoft also declined to comment. (MSNBC is a Microsoft-NBC joint venture.)
“From the Time Warner and AOL perspective, it’s been a plus obviously that they’re getting fought over,” said Barrington Research analyst James Goss. “It says very good things about the importance and the place at the table, if you will, that AOL represents.”
The Google-AOL talks would expand on a relationship which analysts estimate account for 2 percent to 4 percent of Google’s revenue on a net basis. AOL uses Google’s search engine, and Microsoft had been negotiating to get AOL to use its search technology instead.
“Also, AOL has had a long-running relationship with Google so it would seem to me that it would be the most logical thing to continue that relationship if they could strike favorable terms,” Barrington’s Goss added.
Against the backdrop of these talks, corporate raider turned shareholder activist Carl Icahn is leading a group of shareholders advocating a breakup of Time Warner, saying the company is worth more in pieces than a conglomerate. The group has a 3.1 percent stake in Time Warner.
AOL is seen as a critical swing factor on search technology traffic among Internet media rivals Google, Microsoft and Yahoo Inc., just as it once was with online advertising, a category it practically invented in the early 1990s.
AOL made surfing the Internet and chatting online a household phenomenon. But it has been a drag on Time Warner’s stock as it has lost millions of dialup Internet subscribers since the merger of America Online and Time Warner in 2001.
Since then, the Dulles, Virginia-based unit has focused on providing free programming and services to boost online advertising revenue.
Time Warner has acknowledged in the past that one of the key missing components of its Internet strategy was a paid search component, but has not specified with whom the company was talking.
Google, and to a lesser extent Yahoo, have enjoyed dramatic growth in their search advertising businesses over the past year. The companies generate revenue each time a Web user clicks on text advertisements that run alongside Internet search results.