Google Offers $1 Billion for 5% of AOL

Google has offered to pay $1 billion for a 5 percent stake in America Online, the Wall Street Journal reported Friday, effectively pushing Microsoft out of any negotiation with Time Warner. The news marks a major setback to Microsoft's efforts to gain a more even footing with Google in the search industry.

If the rumors prove true, it would mean nearly a year's worth of negotiations between Microsoft and AOL would have been for naught. Microsoft had endeavored to convince AOL to drop Google for MSN Search, as well as combine the sales and advertising departments of the two companies.

But AOL started separate negotiations with Google in September. If a deal is indeed imminent, it would likely not be completed until Time Warner's board meets next Wednesday.

According to the Journal's sources, the agreement would allow AOL the right to sell some of the advertising on Google's Web pages. Google would also promote AOL Web sites through its "sponsored links" feature on the top portions of the search result pages.

However, the partnership drama has been murky since the start. Just last week, the Wall Street Journal claimed that Time Warner and Microsoft were close to an agreement on an advertising pact that would create a service similar to Google's AdWords program.

None of the parties involved were commenting on the situation.

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