Part V: What had happened?

After I started my paper, they have finalized the deal. The New York Times announced it under the title of “Under Terms of Partnership, AOL and Google Agree to Shared Selling of Ads” (New York Times, December 21 2005, Article: Under Terms of Partnership, AOL and Google Agree to Shared Selling of Ads, p. C4) At the end they agreed, this might have been better. In details, AOL has chosen to continue with its previous ally Google, which happened as I expected. Google is going to pay $1 billion for 5% of the AOL, and in addition Google is going to help AOL to increase its ad sales by giving more importance to AOL’s online properties. Moreover, they announced that they will also link their chat systems, which was a move AOL had resisted, but money talked and Google got it, but at all, for AOL, it is perfect to choose such a young and successful company, because I believe the Google is not only trying to keep their relationships warm with AOL and AOL customers; but they are also looking forward to keep their relations warm with Time Warner Inc. in order to expand their affect in advertising market, maybe TV, maybe movies who knows. We will see, but if it happens, which I would love to see, it will really be a revolutionary system for up coming decades. In short, this was Google’s first beat out of Microsoft in an auction. The bells are ringing for Google, what is going to Microsoft do? Maybe a small bargain in Windows Vista.

Part IV: Possible Scenario & Political Strategies of Google

After taking into consideration all of these points, Time Warner’s considerations of several proposals from Microsoft and a single proposal from Google alarmed me. The Business week was pointing out that Google is trying to become a rival against Microsoft, who is the emperor of the entire computer world.

At one side we have the system controller, Microsoft, and in the other case of the scales. Their technology and emergence are totally different. Of course they are both in the computer and internet services business, but the point is that Microsoft founded in 1975, and Google founded in 1998. When we take a look at their market values, Google’s rise with $120 billion market value compared to Microsoft $278 billion is very impressive.

If they become rivals, I think they already had become, because as far as I noticed, Google is supporting Fire Fox internet search bar, which means before Microsoft banned or in such a way limited its abilities on the Microsoft Internet Explorer. However, on the other hand, Microsoft is very strong compared to Google, since Microsoft is the boss, the cop, and also the innovator of the computer world. So if we witness a competition, I guess it will be very though, and we will be able to see how a giant company can act against a younger player in the market.

My thought about this deal was in a way that Google is searching a way through TV market. This is because of the unbalanced income shares between the TV advertising and the internet advertising. The total advertising spending in U.S. was estimated $300 billion to $400 billion, and only $10 billion of this was spent for online advertising. However, which exactly points out that there is an imbalance in the advertising market, researchers announced households are spending 30% of their media times on the internet. So, after a small calculation I can say that the expected income of online advertising market is around $90 billion to $120 billion, which is 9 to 12 times of the current volume.

When we see all these market imbalances and the addictions of the entire advertising market, we normally think “why is this happening?”

The advertising market is very closed in it-self. As far as I experienced in Turkey, which is one of the most profitable sectors compared to others, but really competitive, ad market is one of those markets which is hard to audit or control by the governments, so hard to tax. If you have good relations and a good network, you can quarter double or multi quarter double your advertisement effect, because there is an uncalculated advertisement type, which is the most effective one, advices in the articles. They are much more affective and nobody can find out about any money transactions in such a deal.

Ok, what about the deal, what is Google searching for? The most important point is AOL has the highest visitors daily, it is a known fact and very important. At the hidden side Google is not running after AOL and its customers, as far as we know AOL is not performing well, and Time Warner is thinking about to sell it, and the big hungry Yahoo (was big, but still famous), Microsoft had made their bids for AOL, although they are desirable deals AOL stayed in between. This is why also they can see that Google has much more to do. They just entered the Voice Talk market. As I tested it, it is better than the MSN Messenger, Skype or even Yahoo. By the way these Voice talks are competitors of all mobile phone service providers, which will also be a good economic challenge in the near future, may be in 2 years. In addition to this, Google has just started, 3 or 4 months ago, to its Google Video project. They will make it possible to search videos; they have already started to archive the videos, which is also very attractive for Warner Bros since they have a huge archive. To conclude, Google have much more to do and will not give up about AOL, as it never does.

Part III: Goooooooogle…

What is google? Is there any internet user left that does not know Google? How they did this? A portal that can answer all of your questions, and it does not disturb you. It is simple, and has a value of $120 billion. How can this be? In December 5 issue, the international business magazine Business Week made Google cover story under the headline “Googling for Gold”, and analyzing the value of the company and its potential future choices.

According to the Business Week (Dec. 5 2005, Cover Story: Googling for Google, p. 62, by Roben Farzad and Ben Elgin) Google’s shopping spree is going to determine, may be in a way limit its future strength. One of their arguments is, in a way they have an example to compare with which is Yahoo; Google has shown little interest so far in doing big deals with anyone. $120 billion company is nowadays on the edge of buying part of AOL, Yahoo, on the other hand, in 1999 passed the chance to buy eBay, which has a value around $65 billion – Yahoo’s value is $60 billion. However, the Google guys tell that “We would fund projects that have a 10% chance of earning a billion dollars,… Do not be surprised if we place smaller bets in the areas that seem very speculative or even strange” (from Google’s IPO prospectus) which in such a way means that they are going to gamble –which is not also usual for such a big company compared to its Silicon valley neighbors. And they add “As the ratio of reward to risk is increases, we will accept projects further outside our normal areas, especially when the initial investment is small.” I believe that they are going to try to change the skulled system of Silicon Valley – which is directed and controlled by capital ventures, and give a chance to the projects that have a potential - may be brilliance in them but have less chance to survive. I hope they can find a way to change not only the system of Silicon valley, but also, as a wish, they can come up with, create, or support projects to educate -since they have potential to select useful information for us at any time we ask them for- also free, may be they can be the teachers of the uneducated poor people, who are really suffering and as far the system does not give equal opportunity to everybody, it can be a good idea to try. I hope they will take into consideration the poverty, starving people and homeless kids. For the last two or three decades we can only see heroes in the movies, we need some in real life.

On the other hand, the CVs (capital ventures) are complaining about Google, and defining the way the Google guys behave as “arrogant”, because of their way of analyzing all the details about the ideas and deals that they are asked to buy or agree. However, let me explain in a Turkish manner, you have to be careful, especially when you grow very fast, since you are going to be in the table of the wolves. Beside all, I have a feeling inside that these guys are going to make really good things, when I read “the 10 things Google has found to be found” (Google.com, www.google.com/intl/en/corporate/tenthings.html), I thought that these guys have the same mind with me, and I am sure that they are trying, just like me, finding a way to change the entire stoned, rotten system which is called capitalism, but I am changing my mind about it, and renaming it, “the starving empire of money”.

So, anyway, Google is one of the most brilliant companies of today’s economy, and their actions, purchases and projects are going to affect the economy and lots of people.

Part II: AOL and Time Warner (www.Timewarner.com)

AOL, with a leading position in the internet daily which is around 40%, is a sub-company of media giant Time Warner. It has a publicly traded value of more than $40 billion. With approximately 20 million U.S. members as of June 2005, AOL is U.S.’s leading Internet Service Provider. And with more than 110 million unique visitors to its network of Web properties and to the AOL service, as of July 2005 (Source: comScore Media Metrix, for more statistical data SEE Appendix 6.1), AOL is the second largest online network, operating popular, industry-leading Web brands such as AIM, MapQuest, Moviefone, Netscape, ICQ and many more (for complete list SEE Appendix 6.2)

Time Warner Inc. is a leading global media and entertainment company with businesses in filmed entertainment, interactive services, television networks, cable systems and publishing. Whether measured by quality, popularity or financial results, their divisions are at the top of their categories. America Online, Time Inc., Time Warner Cable, Home Box Office, New Line Cinema, Turner Broadcasting System and Warner Bros. Entertainment maintain unrivaled reputations for creativity and excellence as they keep people informed, entertained and connected.

By combining all, we can easily see that Time Warner has a huge network of people who rely to them and keep visiting, clicking and using their communication services. In the means of advertising these are the most important points; number of people you reach and continuity, are which number one aphrodisiacs for marketing departments and advertising agencies. As far as you know the number and repeating multiplier you can calculate the number of potential customers they will be attracted by your advertisement, and this will allow you to analyze, monitor your advertisements and later give professionals the option of rearranging their communication channels, types, length or any other variables that they have in their campaign.

part I: What is going on? - Google? * AOL * Microsoft?

All ideas about Google began after I read the article “Microsoft Pushes for AOL Deal” in Wall Street Journal, before that I did not think that Google had a mind to become the number one rival of Microsoft, the technology company with a $150 billion market value.

The article is about AOL’s strategic partnership choice. According to the article (Wall Street Journal, Dec. 12, Article: Microsoft Pushes AOL Deal, by Robert A. Guth and Peter Grant) with the help of the Google search technology, AOL currently keeps about 80% of the ad revenue generated by searches conducted by its users. However, the AOL deal forged in 2002 played a major role in Google’s growth, but today Google’s commissions from selling ads on AOL are a small fraction of its revenue. On the other hand, AOL wants to offer advertisers a package of ads that includes ads on AOL’s online service and web properties such as Moviefone.com. Statistics show that AOL attracts 88 million unique visitors to its online properties, compared with 100 million at MSN and 122 million at Yahoo, according to comScore Media Metrix and so; on the other side of the coin there is Yahoo and MSN advertisement partnership, which means another strong back to back partnership in the field. In addition to this Yahoo is a must-buy for brand advertisers, which means that even if it is a small campaign for companies they have to use Yahoo, which creates a fixed income for Yahoo and brings them out to a safer position compared to their rivals.

On the technical side of these partnership possibility, it is not clear that MSN is going to able to match its infrastructure with AOL as Google can do, but I believe in that it won’t be such a big problem at all for a that large and innovative company. Opposed to this, Google wants to save its relationship with AOL, and was willing to buy stake in AOL at a $20 billion valuation, according to people close to the negotiations.

And the comments of every player in this dealing race were interesting. Time Warner’s Chairman said his company was in talk with multiple parties about partnership, Microsoft’s spokes woman declined to comment and on the other hand Google spokeswoman declined to comment, but added that “AOL is a valued partner, and they look forward to continuing to work with their partner more.” When I take into consideration all of these points they make me more anxious because I am sure that all of those spokespeople know much more about this deal. However, on the other hand these Silicon Valley neighbors are hiding something from rest of the world, as far the stock exchange markets are so vulnerable for such news, and they are acting politically and benefiting from the deal in an advertisement way as they always do.