But the deal fell apart last week and culminated in a phone call on December 16 in which AOL Microsoft said the deal was off.
Google sweetened their offer and AOL went for it. Under the new agreement, Google will pay $ 1 billion for 5% of AOL - about twice the market value - and will continue to share advertising revenue with AOL.
The stakes could not have been much higher for both companies. AOL accounts for about 11% of revenue from Google, and lost to Microsoft would have meant a significant change in the war of the search engines. Microsoft would have gained credibility during the night, both for its search services and advertising.
AOL side, this agreement comes the recent criticism that the company is in trouble with nowhere to go. For example, Google is committed to promoting AOL's services in sponsored links, including a valuable collection of online videos that have been languishing.
As for Microsoft, it's back to the drawing board. Time will tell whether the AOL deal helps or hurts Google. But in the meantime Gates and company have been effectively blocked from using AOL to help Google to reduce the size.
==> Microsoft working on something else?
Meanwhile, in a classic Microsoft move, the company said it is in talks with another "level 1 Internet company" to form an alliance to counter the Google / AOL deal.
Some industry analysts believe it is likely that another company is a provider of Internet connectivity at high speed, such as Comcast and AT & T Inc. Joe Wilcox, senior analyst at Jupiter Research suggests that this is the logical step for Microsoft. "Certainly Microsoft benefit if say Comcast and other broadband providers with popular portals chose MSN as the default search," according to Wilcox.
These broadband providers are the same companies that plague the market share of AOL. Anyway, you should not rely on Microsoft for now.
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