Lot’s to digest here in this deal, keeps getting more interesting as more details emerge. It is not clear at all who the winners and losers will be, altough it seems very clear the simplistic, reductionist “Google Won, MSFT Lost” meme is likely to be very wrong.
The instant messenger component of the deal is interesting. I need to understand what is provided for here in greater detail, but the fact that AIM and GTalk will interoperate is fascinating. This seems like the worst aspect of the deal for AOL, as far as I can tell. What do they have to gain by interoperating with GTalk? Given they have a much larger base, I would assume this only benefits Google. Using GTalk will now be a much more interesting proposition for most consumers, they’ll be able to chat with friends on AIM. Saul Hansell writes in the NY Times that GTalk users will have to get an AOL screenname, but I’m not sure how beneficial that will be to AOL, unless they somehow become the default source of online presence with this.
For Microsoft, I am not sure losing this deal is as bad as folks are claiming. It may, in fact provide them with an opening. If Google really does begin to alter what they’re doing on their reasonably pristine site because of new, contractual obligations to AOL, Microsoft can exploit that.  They are good at that type of thing. The key, of course, is that they have to have an equal or better search offering. Seems they’re getting close, but maybe not quite there yet.
I think it is quite possible Google emerges as the ultimate loser from this deal. Aspects of this deal are  likely to spur a challenge to the purity of their brand, like nothing before. Indeed, that process is already underway. Their TAC costs will be higher. They will have to manage a large partner expecting special treatment — you can bet there will be a team from AOL assigned to manage the deal on a daily basis, and to make sure they get what they negotiated. I’d love to know: how detailed are the screenshots that show what AOL is getting?
My sense is that they felt like they had to win this deal in order to feed the beast. The beast being earnings and revenue growth, or the perception of such by Wall Street. If GOOG lost the deal, they would have suffered a short term revenue loss, and the street would have liked that. They are pivoting from a company that is obsessed with the user, and providing a great user experience, to one focused more on managing their business and their revenue growth. That is not the company GOOG was two years ago, and not the company that made fans among many alpha technologists at the turn of the millenium.
The irony is, of course, that GOOG is the one company that could have afforded to lose the AOL deal and still thrive. Instead, they did what any large public internet company would have done in the late 1990s, the big deal to defend their short term corporate interests, with no value or relevance to those of us who use their service. They made a decision that was right for their shareholders only focused on the short term, but wrong for their users. Google seems unstoppable now, but I would wager we may look back in five years time and see this as the deal that began a bit of unraveling. The switching costs for search engines are non-existent, it doesn’t take much to taint a brand (even one as strong as Google) in this digital world, and if someone appears to offer a better service with more neutral results they will begin to chip away.
So my verdict:
1. Winners: AOL and Yahoo
AOL gets a lifeline for its business, and help transitioning to its free portal strategy.
Yahoo is an even bigger winner. They can watch the bloodsport of a MSFT-GOOG deathmatch over the next two years, MSFT will be able to use the AOL deal as a club to batter the brand value of GOOG. MSFT and GOOG will both emerge from this diminished, and Yahoo can position itself as the new pure search service, bolstered by clever technology and services like Flickr and Del.icio.us.
2. Losers: GOOG and MSFT
I think this deal marks the real starting point of brand decay for Google. They will begin to be perceived as yet another public internet company, not necessarily to be trusted for its independence or their proclaimed focus on the user and not doing evil. It may take a while for this decay to really hurt them, and they can of course do things to stop it. But I think it’s unlikely, as I think the “professional” managers (folks from places like McKinsey, folks like Eric Schmidt and Omid) are gaining control. Folks who talk tough about the need to drive revenue growth, or meet Wall Street’s expectations, and who don’t wake up every day wondering what they can do to make life better for their consumers first and foremost.
MSFT, as argued above, will club GOOG hard with this. Remember how Netscape suddenly went from White Hat internet company to Black Hat, and IE became the favored browser? Expect a re-run. But this time, not sure MSFT will benefit from GOOG’s loss. As I argue above, I think that will be Yahoo.

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