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Time Warner, Google announce $1 billion AOL deal

Following days of secret negotiations and leaked reports, search giant Google and Time Warner on Tuesday finally announced a global advertising partnership under which Google will invest $1 billion for a 5 percent stake in the media company's America Online unit.

Under the agreement, Google and AOL will make AOL content available to Google users and will collaborate on online video, showcase AOL's premium video service within Google Video and allow Google Talk and AIM instant messaging users to communicate with each other.

They also said they will expand display advertising throughout the Google network and create an "AOL Marketplace through white labeling of Google's advertising technology--enabling AOL to sell search advertising directly to advertisers on AOL-owned properties."

Google derived about 10 percent of its advertising revenue, about $400 million, from its partnership with AOL through sponsored listings within its search engine in the first three quarters of this year. The companies first partnered three years ago.

The deal, details of which emerged last week from unidentified sources, leaves Microsoft out in the cold after months of negotiations with Time Warner over AOL's search business. Microsoft was on the verge of striking a deal before the surprise turn in Google's favor late last week.