Google Preserves Status Quo with AOL? Yes and No

The Wall Street Journal has it today (sub req.) that AOL is now in “exclusive talks” with Google, apparently bringing down the curtain on Microsoft’s aspiration to own the portal/ISP’s search traffic. Base line, that means Google will preserve its distribution relationship with AOL — essentially a status quo development — but it also means a good bit more.

In addition to acquiring a five percent stake in the company for $1 billion, Google will promote AOL’s content in its sponsored links and include AOL videos in its organic results. Even more curious is that AOL will reportedly sell display ads across the AdSense network, building on the branded CPM units Google started rolling out earlier this year.

I’m curious to see how other video content owners react to the news that Google will give special play to AOL videos. As the video content and advertising space gets hotter, this could deal a serious blow to some of them, while powerfully increasing AOL’s saleable video inventory.