We Could Be Lovers: AOL Courts Google & Microsoft

Coy AOL is trying to get as much as it can for its flat to declining search volume from either current partner Google (AOL CEO Time Armstrong’s corporate Alma Mater) or Microsoft, still hungry for more search wins and share. In an article recapping the D8 interview of Armstrong this week, he asserts there are “more than two potential partners” for AOL.

The current Google search deal expires in December of this year.

Sure, there are scores of search engines out there but only two that are able to genuinely compete for AOL’s business: Google and Microsoft. Yahoo’s not on the list because its index is going to be Bing/Microsoft before too long and the companies are in that transition process now. What Armstrong is negotiating for is an index and ad revenue share (and possibly revenue guarantees).

On the ad-related side the choice is clear: Google. The volume of advertisers and Google’s capacity to monetize search queries are unmatched, even in the new combined MicroHoo universe. But Microsoft, depending on how aggressive it wants to be, could potentially compensate with revenue guarantees.

Also potentially on the table could be maps. AOL has placed renewed emphasis on local, in which maps would be a critical offering.  MapQuest has lagged both Google Maps and Bing in terms of features and functionality. (Yahoo is now going to be outsourcing maps to Nokia/Navteq.)

I predicted on my personal blog that MapQuest would be outsourced to Microsoft and I think that’s a reasonable scenario and part of any likely negotiation with either party. However, that would make AOL further dependent on either partner going forward. The smart move would be to invest in MapQuest and its technology. However that’s unlikely given AOL’s need to keep costs in line and its decision to invest heavily in personnel and content production.

The company’s new mission is branded content producer, not technology platform developer. (Silicon Alley Insider argues that AOL is really negotiating to sell itself whole hog to Microsoft.)