MICROSOFT DROPS OUT OF TALKS WITH AOL FOR SEARCH DEAL

Google and Time Warner Currently Negotiating

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NEW YORK (AdAge.com) -- Google is now in exclusive negotiations with Time Warner to strengthen its advertising partnership with AOL. Microsoft is no longer involved in negotiations to have AOL use its AdCenter search engine, an executive close to the talks said.

The deal with Google won’t be finalized until after Time Warner’s board meets this week, according to reports out today.

Google did not return calls. Time Warner declined to comment.

The deal being negotiated would involve a cross-advertising promotion of some kind in which AOL would sell advertising on Google, and Google would help drive more traffic to AOL’s properties.

AOL needs a partner that can increase its traffic, enhance its technological underpinnings and give it “a supercharge,” Time Warner CEO Richard Parsons said at a luncheon keynote at the Credit Suisse First Boston Media conference in New York last week.

Google has been AOL’s search engine partner since 2002. A renewed deal would solidify the current ad pact with AOL. According to Google’s SEC documents, AOL provides about 11% of its advertising revenue.

Microsoft has been a suiter to AOL since January. The talks were said to revolve around search advertising and would offer Microsoft a hefty audience for its new search engine, giving it an edge over Google, as well as circumvent the Google/AOL partnership.

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