Try the new FT.com

Last updated: December 21, 2005 12:16 am

Parsons hails partnership with Google

  • Share
  • Print
  • Clip
  • Gift Article
  • Comments

Richard Parsons, Time Warner’s chief executive, on Tuesday hailed a new partnership with Google as a key way to “realise the potential” of the media company’s AOL internet division.

Mr Parsons’ comments followed a decision by Time Warner’s board of directors on Tuesday to approve a deal in which Google, the world’s leading internet search company, will pay $1bn for a 5 per cent stake in AOL, giving the business an implied value of $20bn.

The expanded partnership, which became known late last week, is considered critical to Mr Parsons’ effort to head off a group of disaffected shareholders, led by billionaire investor Carl Icahn, who have been pushing for the break-up of the world’s largest media company.

In spite of news of the agreement, Time Warner shares closed down 21 cents on Tuesday at $17.74.

The deal could also deal a blow to Microsoft’s efforts to compete in the search business. Microsoft, a distant third in search behind Google and Yahoo, had been on the verge of closing a deal with AOL before Google swept in. The two companies had entered exclusive negotiations late on Thursday, people familiar with the details said.

Mr Parsons has placed AOL at the centre of his campaign to revive the company, and used Tuesday’s announcement to argue against Mr Icahn’s proposals.

“As digital technologies continue to drive industries together, the great value and opportunity inherent in Time Warner’s structure and array of premier businesses becomes increasingly clear,” he said.

Under their previous relationship with Google, AOL received 80 per cent of the revenues from search-related advertising displayed on AOL websites. However, AOL could not sell the search ads, and its advertisers had to negotiate those deals direct with Google.

Now, AOL will be able to sell the search ads too, plugging a gap in its offerings to advertisers. In addition, AOL will sell display ads on both the AOL and Google internet properties.

Eric Schmidt, Google’s chief executive, on Tuesday called the deal “an important next step” for both companies. “Today’s agreement leverages technologies from both companies to connect Google users worldwide to a wealth of new content,” Mr Schmidt said.

Google is expected to benefit by its new access to AOL’s wealth of music videos, sports, news and other offerings. However, by agreeing to give AOL advertisements preferential placement, it may be compromising the integrity that has been one of its halmarks.

Copyright The Financial Times Limited 2017. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.

  • Share
  • Print
  • Clip
  • Gift Article
  • Comments

NEWS BY EMAIL

Sign up for email briefings to stay up to date on topics you are interested in

SHARE THIS QUOTE