According to a report in the Wall Street Journal (WSJ), Time Warner, AOL's parent company, is close to reaching a deal with Microsoft to create an online advertising service that will rival a similar service provided by Google. Microsoft and Time Warner have been in talks for months, and although the talks originally centered on Time Warner selling a stake in its AOL unit they now center on a collaborative effort to produce Web search and advertising services.
Under terms of the deal, AOL will drop Google as its main search provider and will use Microsoft's MSN Search. Currently, AOL receives a portion of the advertising revenue generated when AOL users access Google to perform a search. In 2005, this arrangement between AOL and Google amounted to $300 million in revenues for AOL.
Little money will change hands if the deal between Microsoft and Time Warner is consummated, according to the WSJ. Instead, the companies will create a joint advertising sales force that will sell advertisements on both the AOL and MSN Web properties and will share the revenue generated by the advertisement sales.
Microsoft and Time Warner should announce a deal by the end of the month. Neither company has commented on reports about the negotiations.