AOL: a Loss Leader

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When Google stole AOL from Overture they likely overpaid. Recently MSN has indicated they want to do the same. Earlier there were talks about a minority ownership of AOL, but AOL never was really for sale, or neither MSN or Google want to carry the AOL bag. All they really want is the search distribution. Whoever wins will likely overpay for the deal. The NYT reports:

But as talks proceeded, the executive said, both Google and Microsoft backed off from their more expansive proposals.

By this account, Google, which values its neutrality, is making proposals that do not involve an investment in AOL at all. It would offer to give AOL an even greater share of the revenue - currently about 80 percent - from search-based advertising placed on AOL sites. Google would also find ways to drive traffic from its sites to AOL.com.

The WSJ has an article [sub req] stating that MSN intends to close the AOL search distribution deal by the third week of December.