Google Inc. and Comcast Corp. are talking about investing in Time Warner Inc.'s America Online division, a move that could shift the geopolitics in the Internet world by creating new alliances between online search and entertainment giants.
Google, which already powers the Dulles-based AOL's Internet search tool in the United States and Europe, wants to strengthen and expand that relationship -- as well as derail AOL's talks about a similar deal with Microsoft Corp.
Through these competing negotiations, AOL has become a powerful player in the global battle between Internet titans Google and Microsoft, which are vying for the attention of millions of Internet users. AOL could augment both companies' empires by adding users of AOL.com, AOL dial-up Internet service and AOL's affiliated Web sites, including Mapquest and Moviefone, according to people familiar with the talks who spoke on condition of anonymity due to the confidential nature of the continuing negotiations.
A Microsoft-AOL alliance poses a threat to Google because AOL uses Google's search engine and is its largest source of revenue. On the other hand, an alliance between Google, AOL and Comcast would make a formidable enemy for Microsoft.
Officials from all four companies declined to comment about the nature of any negotiations. In recent weeks, the talks have resulted in a series of punches and counterpunches.
First, Microsoft proposed replacing Google with its MSN Search on AOL's Web sites. At the same time, Microsoft offered to combine its own MSN Internet service and pour cash into AOL. Those talks are continuing, though insiders said such a deal appears less likely.
By selling a stake in AOL, Time Warner would get a major infusion of cash that would enable it to increase the size of a stock buyback or issue a one-time dividend to shareholders. Corporate financier Carl C. Icahn has been pressuring the company to do a larger stock buyback and take other steps to boost its lagging stock price.
The proposed MSN-AOL alliance prompted Google to enter the fray and propose an alternate deal with AOL. Meanwhile, Comcast's primary interest is in marketing its own high-speed Internet service to AOL's large but shrinking base of dial-up Internet users.
Microsoft yesterday made a retaliatory move. Microsoft and Yahoo joined forces to allow millions of their instant message users to chat with each other online, a combination that threatens AOL's dominance in that space.
While cell phone users can call each other even if they use different wireless carriers, the same has not been true for Internet messaging. Until now, computer users could only call, send or receive messages from users in the same instant message, or IM, network. The agreement, which takes effect during the second quarter of next year, gives Yahoo and MSN a combined U.S. user base of 49.2 million, which puts them behind AOL, with 51.5 million IM users in the United States.
For years, analysts predicted that IM providers would allow communication between their networks, but companies have kept those users walled from each other as a way of channeling more traffic to other services on their sites. Such rivalries are finally giving way out of necessity, some analysts said, as competition forces the companies to band together to maintain their base.
"Microsoft and Yahoo! look forward to bridging the divide between our global communities," Steven A. Ballmer, chief executive of Microsoft, said in a news release.
But analysts saw the combination of MSN and Yahoo's messenger services as a move to block Google, which last month launched its Google Talk service and still has very few IM users.
"The elephant in the room nobody is talking about is Google," said Charles S. Golvin, an analyst with Forrester Research Inc. "That is the common threat. Certainly, Google Talk as an IM service is no threat to MSN and Yahoo, but clearly in other ways, Google threatens them and helps to bring them together."
Because new users tend to sign up with the same service as their friends, family and co-workers, Google could have a tougher time catching up to Yahoo and MSN, said Allen Weiner, an analyst with Gartner Inc. "By these two companies working together, I believe it's an attempt to crowd Google out of the market."
For consumers, one of the consequences of such alliances could be an overall transformation of online communications and entertainment. Over time, IM could replace other forms of communication, including phone calls and e-mail.
Yahoo, Google, MSN, AOL, and Skype Technologies SA all offer a form of computer-to-computer calling over their IM service. They could eventually become major networks for sharing music, video and other digital files.
