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AOL's Deal With Google to Add Splash to Site's Ads Displays Are to Include Logos and Graphics

Posted on: Wednesday, 21 December 2005, 12:00 CST

By Saul Hansell

Users of Google's search engine will soon see something unfamiliar on the famously uncluttered site: advertising with logos and graphics. And the advertisers will not be limited to America Online, whose talks with Google prompted the change in policy, according to two executives close to the companies' negotiations.

As part of their deal, which was to be formally announced on Tuesday, Google is providing AOL with $300 million worth of advertising on Google's Web sites, intended to draw Google search users to related content on AOL's sites, the executives said. That sum is on top of the $1 billion in cash that Google is to invest to buy a 5 percent stake in AOL.

Representatives of Google and AOL said Monday that their companies would not comment on any aspect of the negotiations. Google, which has been providing search technology and placing search-based advertising on AOL since 2002, emerged on Friday with a tentative deal to renew and expand that relationship, fending off a challenge from Microsoft.

The executives said that at AOL's request, Google would begin to experiment with various forms of graphical ads and that it would make the same formats available to other advertisers.

Google has already started to sell graphical ads for placement on other sites it controls. Plans to do so on Google itself were accelerated by the AOL talks, an executive involved in the negotiations said.

Graphical advertisements, like the common rectangular ads known as banners, have been a feature of most commercial Internet sites for a decade. Google made a name for itself, in part, because it went without graphical ads in favor of small text ads generated by user search inputs. Google's simple pages, quick to load and easy to read, helped the site build a loyal following of users around the world, and text advertisements proved extremely valuable to marketers looking for people actually interested in their products.

As AOL's parent, Time Warner, was exploring potential deals with Google and Microsoft, it pressed Google for ways that Google users could be directed to AOL pages. AOL is trying to replace declining profits from its dial-up subscription business with advertising revenue from free Web sites like AOL.com.

The $300 million in advertising being provided to AOL can be spent on traditional text ads or on new experimental formats, the executives close to the talks said. AOL will have to bid for the advertising space in Google's auction, and will be charged out of the $300 million allotment.

No advertising is contemplated for the Google home page.

Analysts said Google's new openness to graphical ads may well increase its already rapidly growing profit.

"Google has always said they didn't want display advertising on their site because they felt that one of their cultural advantages was their clean, uncluttered look," said Mark Mahaney, an analyst with Citigroup Smith Barney who covers Google but does not own any shares. "Google does have properties where there is no reason they couldn't put up display advertising."

Source: International Herald Tribune

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