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AOL Betrays Google

By Seth Jayson (TMF Bent)
January 10, 2006

Butch and Sundance. Starsky and Hutch. Peas and carrots. If you're thinking of adding AOL and Google (Nasdaq: GOOG) to that list, think again.

Ever since the entire AOL bidding war was resolved, I've been thinking that Time Warner (NYSE: TWX) isn't nearly the great Google buddy that the press and investors thought. Today, I think we're seeing confirmation.

Remember that Google basically had to shell out $1 billion in order to keep its share of AOL's search biz. As part of the deal, it had to compromise its increasingly farcical "don't be evil" motto by pledging to help AOL tweak its web pages so that they'll appear more prominently in Google's unpaid search results. ("We won't cheat, but we'll show you how!")

The hope, of course, was that cementing that relationship would ensure Google better access to the rest of Time Warner's increasingly Internet-enabled media library. But the past week's announcements in the field of video search are starting to convince me that Google's been had. Suckered. Outmaneuvered by those sly dogs at the old-school media empire.

After strongarming the billion bucks out of Google, what was Time Warner and AOL's response to Google's much-hyped video rollout this week?

Hint: It's not "signing a video distribution deal."

Instead, AOL said, "Thanks for the money, and by the way, we're upgrading our own video search." Webheads can find it at aol.com/video. AOL souped up its own video search platform by purchasing the small video search company Truveo. Ever since I first heard about Truveo's search, which was purported to be smarter than other video searches out there, I thought it was a no-brainer for a buyout. The buzz on Truveo was that it found better results due to its visual crawling technology. I never found it all that incredible, but I did hope that Microsoft (Nasdaq: MSFT) would pick it up, especially since MSN's own video search is so lame it can't even come up with a result for "star wars kid," the most famous Internet video of them all.

Not that a homegrown service can't do well. AOL's first-generation search can generally find what I'm looking for. Yahoo!'s (Nasdaq: YHOO) video search works admirably. And you can bet that MSN, IAC/InterActive's (Nasdaq: IACI) Ask.com, and everyone else will be trying to get in on the game. There's simply too much money out there to skim, even if Apple (Nasdaq: AAPL) has been first to sell digital video downloads to the masses via iTunes.

Which brings us back to the AOL/Truveo deal. AOL's video search will probably never rival Google's in popularity and scope, but this isn't about winning a search war. It's about keeping other people's mitts off the future revenue stream. Time Warner's got way too much saleable video content to want to give it all away to Google by ceding leadership in video search.

If this is a hint of things to come between these 5% friends -- and I don't know what else it could be -- Google fans who hailed the recent AOL deal would do well to wonder just how much they're going to get for that billion bucks.

For related Foolishness:

* Google Promises, Microsoft Delivers
* A Taste of Google
* Google Falls for AOL?

Time Warner is a Motley Fool Stock Advisor recommendation. For more stellar stocks from David and Tom Gardner's portfolio, sign up today for a 30-day free trial.

Seth Jayson thinks AOL got a pretty sweet deal from Google. At the time of publication, he had shares of Microsoft, but no positions in any other company mentioned. View his stock holdings and Fool profile here. Microsoft is a Motley Fool Inside Value recommendation. Fool rules are here.

http://www.fool.com/News/mft/2006/mft06011012.htm