Google-AOL ... Has it's pro's and con's

So Google has agreed to buy up a piece of the fledgling AOL for $1 billion. This is an interesting scenario, considering it was Yahoo! that opened the lines of communication with Time Warner about picking up a stake in their AOL product.

The affects of this partnership will soon be seen with many products. There are definitely some good and bad in this arrangement.

First, this arrangement is a defensive move (in my opinion) by Google. AOL is currently its largest client, providing 10% of its advertising revenue on its various website and search which is 'powered' by Google. If Yahoo! or Microsoft were successful in purchasing part of AOL, of course the ad revenue would be obliterated.

Ultimately, AOL decided it was better to go with the leader in ad revenue and search, than to help one of the competitors grow ... and Google, was successful in blocking a rival from buying up a great customer. But at what sacrifice?

Well, Google has agreed to expand on its display advertising. This means that you may see more flashy banner ads on websites with ads powered by Google. This abandons the "non-intrusive" text-based ads you currently see on your Google Search Results and GMail folders.

AOL Content will also be more featured on Google pages. What does that mean? That means that potentially, while searching for information about your favorite sports team, rock band or any other product or service AOL has the ability to give you, rather than seeing content just displayed on the "Sponsored Links" section, results may be skewed to show AOL pages towards the top of your search. To me, that kindof sucks.

The upside however is that AOL will sell search-related ads on AOL properties ... meaning more income for Google, and more fun products being made by them for us to play with. A growing Google is a good Google.

Also, Google and AOL plan on making their instant messaging services talk to each other. This is good because I can finally get rid of AIM and clear the space on my desktop ... since Google Talk can be integrated into my Google Deskbar.

So, the Google and AOL pact definitely has its down sides, but in the end it is a great defensive tactic for Google to have a 5% stake in AOL, and it is a partnership that will help AOL to start getting away from its struggling subscription-based revenue stream into a more advertising based system.