WITH AOL DEAL, GOOGLE MAY GET TO GO PUBLIC AGAIN
Consider: AOL and Yahoo made hay when Google went public. Both owned substantial stakes in Google due to earlier traffic deals, and both cashed out major paydays after GOOG's IPO. — Consider also: The success of Ask Jeeves …
Context & Ripple Effects
The arc runs through the traffic deals of the early decade: Yahoo and AOL each took substantial Google stakes in exchange for search queries, then cashed out major paydays after GOOG's IPO — confirmed history that makes Battelle's 'go public again' framing land, because the last time AOL touched Google equity it was on the winning side.
By mid-December the auction for AOL had narrowed to Google versus Microsoft — Reuters had the two still vying on December 7 — and the same-day pickup by the Los Angeles Times and siliconvalley.com shows how widely the reported shape travelled: roughly $1 billion for about 5 percent of AOL. Whether Time Warner takes Google's cash or Microsoft's bid decides who controls a major chunk of search distribution.
First-order effects
- If the reported $1 billion investment closes as described, Time Warner banks cash and a deep-pocketed partner for AOL while Microsoft — which Reuters reported was still vying for AOL on December 7 — exits without the search distribution it pursued all quarter.
- Google converts a cash outlay into a minority AOL stake plus continuity of AOL's search traffic, reversing the direction of the old traffic deals in which Yahoo and AOL were the shareholders.
Second-order effects
- Shut out of AOL, Microsoft has to lean harder on its own advertising platform and alternative distribution partners, raising its cost of matching Google's locked-in query volume.
- Yahoo — which cashed out Google stock after the IPO and competes with both bidders — now confronts a tighter Google-AOL alliance spanning search and display advertising.
Third-order effects
- Equity becomes a pricing mechanism for web traffic: if platforms pay for distribution in ownership stakes rather than pure revenue-share, media owners' valuations increasingly embed their bargaining power against the ad networks.
- The boundary between advertising platform and media owner blurs — Google moves from selling ads alongside a content destination toward holding a financial stake in the destination itself, a structure rivals would have to answer.
The trend: Search advertising is consolidating through equity-for-distribution deals, with the Google-Microsoft contest over AOL as its sharpest 2005 expression.