Google Inc. on Tuesday said it has agreed to pay $1 billion for a stake in America Online Inc., and to form an online advertising partnership with the Web portal.
Under the deal reached with AOL parent Time Warner Inc., Google, based in Mountain View, Calif., will get a 5 percent stake in AOL, based in Dulles., Va. As a result, the search engine giant will become the only shareholder in AOL, other than Time Warner. The New York media giant, however, would retain management control and full strategic flexibility over its subsidiary
Google, on the other hand, would have certain customary minority shareholder rights, including those associated with any future sale or public offering of AOL.
The ad deal is important to AOL as it moves from being an Internet service provider dependent on a dwindling number of dial-up subscribers to becoming a portal capable of tapping the growing online advertising market. For Google, the deal expands its reach as a Web advertising platform, and gives it access to AOL content, particularly its video services.
Google has provided search to AOL for three years, so the three companies positioned the latest deal as an expansion of the current alliance.
"We're very pleased to build significantly on our special relationship with Google in a way that will meaningfully strengthen AOL's position in the fast-growing online advertising business and help drive more advertisers to its Web properties," Dick Parsons, Time Warner chairman and chief executive, said in a statement.
Eric Schmidt, chief executive of Google, said the company was "thrilled to strengthen and expand" its relationship with AOL.
"Today's agreement leverages technologies from both companies to connect Google users worldwide to a wealth of new content," Schmidt said.