Hey AOL, You Got Googled

As part of lunch conversation yesterday, a very smart man savvy in the ways of the Internet joked that AOL might be the black widow, that kills its mate. The blogosphere this morning, it becomes even more evident that the people are downright pessimistic about the potential impact of Google buying 5% of AOL, a division of Time Warner. (Actually given all the settlements, and other deals, like this most recent one, Time Warner might have made more money off beleaguered AOL that it seems. Anyone remember the $750 million settlement with Microsoft back in 2003)

AOL, by the way continues to be the king maker in the Internet space, despite its troubles. I think many, scratch that, almost all have focused on the advertising aspect of this deal. In my mind, this is a deal which has larger strategic implications. The first – the instant messaging. The two companies explicitly state that they are going to interoperate their IM networks. For Google’s GTalk, this is a big boost, something it needed desperately in order to increase traction when compared to Microsoft and Yahoo. The IM alliance between Google-AOL is a good way to combat Microsoft-Yahoo IM combo.

Wait, there is more…. Google had announced major voice-related announcements to the Jabber platform via its Jingle project.

With the release of Libjingle, the makers of these clients will be able to add the ability to make and receive calls between their clients and Google Talk. In fact, they’ll be able to support calls between their clients and ANY OTHER clients that support Libjingle .

An interoperability between the two IM networks could soon be enhanced to facilitating between AIM and GTalk users. Add to the mix, other SIP based clients that can talk to GTalk, such as Gizmo Project, well there is an informal VoIM network that starts to form. Google is very ambitious about Gtalk, and I can bet they are working on developing a bigger ecosystem than most people realize. From get go, they it seems worked on the premise that voice is worth “zero” in some situations. Despite appearances, there might be a method to their madness.

The second aspect of investing in AOL – video. Google stands to make a lot of money from video advertising over the Internet, as my dear friend Cynthia Brumfield has pointed out. They have been fighting an uphill battle to find a toehold in Hollywood, and well there is no one more old school Beverly Hills than Time Warner. I think this will be the thing that helps the company get some traction for its Google Video business.

Some have expressed their chagrin at flashing ads, or whatever. Well, Google wasn’t going to try and do a portal. They did. So deal with it and move on. In the end $1 billion in AOL will pay for itself, because Google will be selling a lot of ads on the AOL properties. And if nothing, its a hedge against Microsoft.

The deal terms…

* Creating an AOL Marketplace through white labeling of Google’s advertising technology – enabling AOL to sell search advertising directly to advertisers on AOL-owned properties;
* Expanding display advertising throughout the Google network;
* Making AOL content more accessible to Google Web crawlers;
* Collaborating in video search and showcasing AOL’s premium video service within Google Video;
* Enabling Google Talk and AIM instant messaging users to communicate with each other, provided certain conditions are met; and
* Providing AOL marketing credits for its Internet properties.