Google's $1 billion investment in a 5 percent stake in Time Warner's AOL was officially announced Tuesday and expands their existing search engine agreement to include advertising, instant messaging and video components, reports CNET. The deal also creates an "AOL Marketplace through white labeling of Google's advertising technology" enabling AOL to directly sell search ads on AOL-owned properties.
The companies said they would collaborate on online video search and would showcase AOL's premium video service within Google Video; moreover, Google Talk and AIM instant messaging users will be able to communicate with each other.
Google Chief Executive Eric Schmidt said the agreement "leverages technologies from both companies to connect Google users worldwide to a wealth of new content."
Google and AOL complement each other, according to JupiterResearch analyst Todd Chanko: "Google has locked up paid search, and AOL does really well with the display and banner ads and the other forms of advertising."
The deal leaves Microsoft empty-handed after months of negotiations with Time Warner over AOL.
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