Google fends off Microsoft's attack on its revenue stream

The Wall Street Journal reports that Google will soon ink a deal with AOL to buy 5% of its stock for $1 billion and renew its advertising partnership. This apparently is a deal rejecting deal complexity as much as anything.

Google's late maneuvering also left Microsoft at the altar. Last week, it appeared close to sealing its own transaction with AOL. But people close to the talks said Time Warner executives grew uneasy over the complexity of a contemplated joint venture with Microsoft, as well as the fledgling nature of its search-engine and advertising technology. They also were won over by the chance to deepen ties to Google, the leader in search queries, which has the most online ad revenue among Internet companies.

More importantly for Google, this deal neutralizes a plan by Microsoft to cut off its "air supply" of revenue, to quote a prior Microsoft effort on Netscape. And given that Google derives much of its market power and ability to garner advertisers from being the largest search engine, it was a deal that it couldn't afford to lose -- yet.

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