Google, AOL Cement Advertising Partnership - The Down Side

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Not everyone who owns a piece of Time Warner is wildly enthusiastic about the deal. Carl Icahn, who leads a group of investors who together own about three percent of Time Warner, wrote a very nasty letter to its board of directors when he heard that the agreement was in the works. He believes the sale of the five percent stake to Google to be a “disastrous action” that could preclude a sale of AOL to some other company.

To use Icahn’s own words, “Like all shareholders, I am not opposed to Time Warner entering into an AOL transaction that creates long-term value…However, I am deeply concerned that the Time Warner Board may be on the verge of making a disastrous decision concerning an agreement with Google.” He may indeed have a point. Google’s stake gives it a say in any future sale or public offering of AOL. You can bet the search engine giant would have something to say if Time Warner contemplates selling even a small part of AOL to Microsoft or Yahoo! or even eBay.

That’s not the only potential down side to the deal. With Google’s statement that it would help AOL’s content show up better on Google, some observers are wondering whether Google will maintain its neutrality. Google CEO Eric Schmidt insists it will: “We are not giving (AOL) preferential treatment, nor did they ask for it…I am making this clear: we will not let a business deal interfere with our search engine results.” Not everyone believes him. One commentator at the Register looked at this insistence from Google and wrote “Translation? Yep, it looks like Google will continue to water down its results, which already suffer from an unhealthy relationship with blog garbage.”

Indeed, this could be a unique opening for Microsoft. Sources close to the deal said that Microsoft was left out in the cold because it wasn’t interested in investing cash in AOL. But advertisers are going to wonder now whether Google will truly be neutral in its search results and give their customers a level playing field on which to display their advertising. One analyst observed that “If I were Microsoft, I’d certainly want to play up the fact that it is neutral with respect to search and search placement.”

Next: A Lost Opportunity? >>
 

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