AOL and Google Remain Best Buddies

AOL Tuesday said it will stay the course with Google's search engine. Online service also prepares to expand search capabilities for customers.

AOL announced on Tuesday an expanded multi-year agreement to use Googles search engine and its sponsored search links within its AOL Search, extending a partnership that began in May 2002. Terms of the agreement were not released, and AOL officials did not return calls seeking comment.

In a release, officials said the agreement will allow the Dulles, Va.-based subsidiary of AOL Time Warner Inc. to continue offering Googles search engine results as well as its paid search listings to members of the AOL and CompuServe services as well as on the and Netscape Web sites.

About 150,000 advertisers pay to be included in sponsored search results from Google, which appear alongside search results coming from Googles index of more than 3 billion Web pages. AOL will expand the sponsored links to the business listings and directories of its AOL Yellow Pages section, the company said.

Along with the extended agreement, AOL launched a series of enhancements to its AOL Search. These include a "smart box" search tool in its AOL 9.0 Optimized service that makes suggestions on keywords, Web sites and company information as a user is typing a query as well as localized search results of businesses based on a users zip code.

"This agreement is good for Google and AOL," said Charlene Li, a principal analyst at Forrester Research Inc., in San Francisco.

The move is significant because its solidifies a relationship where Google gains an audience for its search results that is distinct from its own search site while AOL earns a cut of the advertising dollars from sponsored links that could become increasingly lucrative, Li said.

The search industry is in the midst of major shifts following a series of acquisitions that have reshaped the competitive landscape. Yahoo Inc. acquired search engine Inktomi Corp. in March and was expected to complete its acquisition paid search leader Overture Services Inc. on Tuesday.

AOL dropped Inktomi for its search engine and Overture for paid listings last year when it switched to Google.

Meanwhile, speculation has grown that Microsoft Corp. is pushing its MSN search in-house after reports from Web sites in June that it was crawling sites with its MSNBot technology. MSN on Monday said it is dropping LookSmart Ltd. as its provider of paid inclusion search results. MSN officials said its other search partnerships with Inktomi and Overture will be unaffected, but Li said she anticipates further shifts for Microsoft over the next year.

By keeping its AOL partnership, Google powers two of the top four search destinations on the Web, according to August data from comScore Networks Inc.s qSearch. Googles own sites are first, accounting for 31.5 percent U.S. Web searches, while AOL-affiliated sites and services are third, accounting for 19.7 percent of searches. Yahoo sites landed in second with 25.7 percent while MSN and Microsoft sites were fourth with 17.2 percent.

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