Google and AOL - Where Is Google Going?

Back in November, I wrote an article entitled "Google - the new Skynet?" inwhich I questioned where Google was heading with it's ever increasing new products, services and partnerships. In the last 48 hours, Google succeeded in beating Microsoft in partnering with AOL via a 5% acquisition for US$1billion. Many commentators are somewhat mystified as to why Google would spend so much to acquire so little of AOL. Most focus on the value of "Search" where AOL provided some 10% of Google's revenue during the first 9 months - or approximately $430million. Had Google failed to win, they would have lost a reasonable chunk of their revenue to Microsoft and also seen a AOL-Microsoft alliance competing with them in the lucrative Search field.

However, one thing that many have failed to focus on is what AOL has to offer Google.

Google is currently the leader in Search, and has a wide number of products and services available to the general public. Products like Google Talk, Gmail, Google Video etc etc. What they lack though is an established customer base which Google can tap into. Sure, one could claim that the entire internet community is their customer base, but there is no "loyalty" in this respect.

What AOL offers Google is just that - a captive customer base which it can easily tap into. Take for example Google Talk. Currently the three main IMs are AOL, Yahoo and MSN Messenger, none of which have interporality with GoogleTalk. So, although Google Talk is a great product, people are not flocking to it as people do not have family and friends on it. And many people are not willing to dump their current IM for Google Talk if they can't chat to anyone.

The same applies with Google Video. A great service but mainly made up of home videos provided by the public. What Google Video doesn't have is the movie and tv studios to provide the content to make Google Video a success.

With the new AOL- Google partnership, do not be surprised to find that in the next 12 months, Google Talk will have interporality with AOL's IM, and that movies and TV shows are suddenly part of Google Video.

Further, AOL operates not only in the USA but also in Germany, Argentina, Australia, Mexico, Japan, Canada, Brazil, France, UK and Puerto Rico. AOL has a customer base that Google can easily tap into to provide its services in conjunction with AOL's own products. In all these countries, AOL has paying internet customers - a readymade customer base for Google.

With AOL being part of the Time Warner group, Google will have access to CNN, Time, HBO and Warner Bros and their content.

Don't get me wrong. I am not saying that simply because they now own 5% of AOL, Google will automatically get access to all this. However as part-owner, they will have a foothold and leverage to obtain access. Paying US$1billion for a 5% stake in AOL is a lot of money, but the side benefits Google will obtain from this partnership far outways the cost. Its cheaper paying US$1billion and gaining access to a large international customer base and "rich" media content, than setting it all up by itself.

And that is what Google is eyeing for, not the money that AOL is generating for them via the "search" service.

James