October 19, 2004 11:04 AM PDT

AOL, Google expand alliance in Europe

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America Online and Google have expanded their partnership in Europe, in a deal that once again pushes search rival Overture Services to the margins.

Under the deal, announced Tuesday, AOL subscribers in the United Kingdom, France and Germany will receive targeted advertising from Google related to their search request.

Google has already been providing Web search results for all AOL search-related products in Europe. Google AdWords advertisers will now appear on all search results on AOL's European Web sites, the companies said.

The agreement is yet another coup for Google in the fierce battle to win distribution partners for its online ad service against rival Overture, a subsidiary of Yahoo. In May 2002, Google managed to wrest a deal away from Overture for AOL's business in the United States. It has now won over AOL Europe, which had been working with Overture for ad-sponsored search results since January 2002. AOL said it has 6.3 million members in the three markets. Financial terms of the deal were not announced.

"It's a competitive market. Our partnership with Overture has been successful, but now, we have chosen to go with Google," an AOL Europe representative said.

The deal follows recent reports that AOL is planning a desktop search product to compete with similar products by Google and Microsoft. Meanwhile, Google has been looking at ways to expand its advertising programs with third parties. Earlier this year, it introduced the use of banner ads on third-party Web sites, reversing its earlier policy.

"AOL's European operations will benefit from the revenue opportunity, while its users will enjoy an enhanced online experience through the addition of relevant commercial information," Omid Kordestani, senior vice president of worldwide sales at Google, said in a statement.

For its part, Overture said an agreement extension with AOL Europe would have been financially unsound.

"Overture engages in distribution partnerships that make strategic and financial sense for our business. In the case of AOL Europe, these criteria could not be met. And while Overture aggressively pursues distribution agreements, we are absolutely willing to forego those that do not meet these performance thresholds," a company representative said.

The company added that the loss of AOL Europe will not significantly impact business overseas, where it has partnerships with MSN, Wanadoo and Lycos Europe.

Reuters contributed to this report.


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