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The worst-kept secret in cyberspace was confirmed late Tuesday when Internet search leader Google Inc. and America Online Inc. announced that Google would invest $1 billion in AOL as part of an expansion of the companies’ strategic alliance. Rumors of the investment have circulated for the past week. Mountain View, Calif.-based Google will receive a 5 percent stake in New York-based AOL for its $1 billion. The two companies said they will create a global advertising partnership, collaborate on an online video offering and make more AOL content available to Google users. Google’s instant messaging software also will be compatible with AOL’s Instant Messaging users. The two companies have had a strategic alliance since 2002 for Google to provide search technology on AOL’s network of Internet properties. The new deal will allow AOL to sell search advertising directly to advertisers and expand display advertising through the Google network. They also extended terms of their existing European relationship. With the investment, Google will become the only shareholder in AOL other than its parent company, Time Warner Inc. Dulles, Va.-based Time Warner will retain management control and full strategic flexibility over AOL, while Google will have certain minority shareholder rights, including those associated with any future sale or public offering of AOL. Additional financial terms of the agreement were not disclosed. The investment is the largest by Google since it went public in 2004. The company in September raised $4 billion in a secondary offering, and had more than $7.6 billion in cash before investing in AOL. Copyright �2005 TDD, LLC. All rights reserved.

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