On Thursday of last week Microsoft began talks with Time Warner regarding a possible merger between AOL and MSN. This suggestive merger is speculated to be a counter to the very serious threat that Google poses in the portal and search markets. However, in an attempt to stop a Microsoft takeover and to protect the almost $400 million in revenue that Google gets from its biggest partner, Google is speculated to make their own bid for American Online. Let the bidding war begin!
Google began providing search services for AOL in 2002, replacing Overture, which was later acquired by Yahoo! and just recently renamed Yahoo! Search Marketing. In 2003, Google and AOL broadened their agreement, as Google had agreed to pay AOL for every time someone clicks on one of its sponsored links. In 2004, AOL generated about 12 percent of Google's revenues, which as I stated above is somewhere in the neighborhood of $375 - $400 million.
It makes sense for Google to counter any offer that Microsoft may through at AOL for 2 very simple reasons. First,as I mentioned above, acquiring AOL will protect Google $400 Million revenue stream. However, and more important, the second reason is that they would be denying MSN the support it needs to become a bigger competitive threat in the search engine market. A true win, win on Google's part if they pull it off.