When Steve Ballmer yelled at a departing Microsoft employee that he would “kill Google” we had no idea just how direct a method he had in mind. Buying all or part of AOL may be the first part of the master plan, as Google relies heavily on the advertising pages that come from Yahoo, since it now syndicates its search to Google.
One estimate suggested that Google would lose as much as $380m of advertising revenue if AOL dropped its search engine and took on MSNs. That would cut Google’s profit by something like 25 per cent, potentially giving its huge share price something of a tumble. No wonder Google is thought to be entering the bidding to partner with Time Warner on AOL instead of Microsoft.
However, the move by Microsoft could still potentially backfire, although with its cash mountain you would expect it to win the day. Google only chance is to paint a sufficiently rosy future picture to Time Warner’s management about what kind of outcome there would be for an AOL partnering Google, then perhaps a lot more than that $380m could be saved.
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