AOL & Google deal a nightmare for Microsoft?

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AOL & Google deal a nightmare for Microsoft?

The ink isn't even dry from Google's 5% $1 billion stake in AOL and yet some are claiming Bill Gates is still wiping his tears from losing the battle for AOL to Microsoft's arch nemesis, namely Google. America Online parent Time Warner and Eric Schmidt's Google announced some intriguing integrations between these two Internet giants late yesterday leaving Microsoft in the lurch.

Rich Tehrani and I were commenting yesterday how AOL's portal generates generates about 10% ($420 million) of Google's overall Adsense/Adwords pay-per-click dollars. This is amazing to me since I never visit since I dumped the AOL client browser and its dial-up Internet access so long ago. Yeah, I admit it, I used to have AOL as my Internet provider, though I still don't get why millions still pay a premium for AOL's dial-up service. Anyway, this relationship with AOL gives Google one of the Internet's largest content producers. Google will continue to provide search technology for AOL but they've also "tied in" some other interesting things as part of the deal.

For one, Google Talk will work with AOL's popular instant-messaging program (AIM), as long as users sign up for a free AIM screen name. While Microsoft and Yahoo recently inked an interoperability deal, some are stating that Microsoft loses out on interoperability with AOL's AIM users.

Honestly, I'm not sure if I buy that. Google has always promoted open standards and interoperability as part of their "do no evil" mantra. I would be surprised if Google decided now after all their talk about "standards" and "openness" and opening up their APIs to intentionally block Microsoft's MSN Messenger from communicating with Google Talk or AIM. Of course, right now they don't communicate because they haven't standardized on a single method to support interoperability. You have SIP, SIMPLE, XMPP, etc. The standards are there, we just need for the IM vendors to agree to standardize on a standard. ;) Besides, if Trillian & GAIM can today work with AOL's AIM, MSN Messenger, Yahoo Messenger, and IRC all in one software client, then it shouldn't be hard to interoperate, right? - assuming the IM providers don't intentionally block their competitors of course.

I wonder where all this IM/VoIP interoperability leaves proprietary IM/VoIP clients such as Skype? Eventually, IM and VoIP software clients WILL interoperate if they use industry standards such as SIMPLE. Skype is architected such that it uses proprietary methods in order to traverse/penetrate firewalls, encrypt the voice, etc. and it uses decentralized supernodes instead of a centralized SIP registrar controlled by the IM vendors. The IM vendors want that control so they can easily push out ads to the clients, amongst other reasons. It would be a huge overhaul to redesign Skype to support industry standards and perhaps at some loss in flexibility and features. It certainly wouldn't be the same Skype we know today, that is for sure.

In any event, in addition to integrating with AOL's AIM client, Google and AOL also agreed to integrate AOL's video clips in AOL's new video service, in exchange for AOL getting "credits" to promote its Web sites and content through Google's search engine's keyword ads (Adsense sponsored links). This is definitely the "Trojan Horse" of this entire deal. Google (Google Video) and AOL are very high on video content and embedding video advertising, so this deal could be one way of promoting and leveraging each other's video content. While this is definitely a win-win for Google who pulled $1 billion from their "petty cash fund" to get a 5% stake in AOL and some interesting symbiotic partnership "perks", I don't see this necessarily as a loss for Microsoft. If anything, perhaps Microsoft will now be the torchbearer for IM interoperability standards for fear of being left out in the cold? Let us hope...

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