WebProNews

A joint effort between Time Warner and Microsoft will see them co-develop an advertising network to compete with services from Yahoo and Google.

The grandiose plans that saw Microsoft spending billions on a stake in AOL and combining dialup businesses has been scaled back quite a bit. As the Wall Street Journal reported, the changes in the negotiations will still have tremendous impact, with a formal deal possibly announced before Christmas.

The Journal cited people close to the talks between Microsoft and Time Warner in noting the discussions have changed to building an online advertising service to rival Google's AdSense and Yahoo's newly-launched Publisher Network. A deal with Microsoft would have serious impact on Google, AOL's existing search and advertising provider:

Under the negotiations, AOL would drop Google as its primary provider of Internet search and use Microsoft's MSN service instead, say people familiar with the talks. Currently, AOL relies on Google's search-engine, and Google gives AOL a cut of the advertising revenue generated by AOL customers. Last year, Google turned over $300 million in revenue to AOL. Their current contract runs well into 2006.
A joint advertising sales force would sell ads that would appear both on AOL and MSN sites. Sources told the Journal the two would develop a self-service ad platform; whether that would be derived from Microsoft's in-testing AdCenter project, designed to be a self-service ad platform, is not known.

UPDATE: The Wall Street Journal has changed the story they posted online. At 4:47 a.m., the article said a deal would be announced within three weeks. At 9:29 a.m., the article was updated and that passage was removed and replaced with this: An agreement is expected to be struck sometime before year-end, but it is still possible that AOL could choose instead to deepen its relationship with Google at Microsoft's expense.

David Utter is a staff writer for WebProNews covering technology and business. Email him here.