Google Close to Big AOL Payoff has confirmed that AOL and Google are in exclusive negotiations for a piece of the struggling Web property.

A person close to the companies said that Microsoft had been a party to the discussions, but was notified that it was no longer in the running, and that Google was the preferred partner.

How much is AOL worth?

About $20 billion, according to a report in the “Wall Street Journal.”

An article in today’s WSJ states the deal calls for the the search goliath to pay $1 billion for a 5 percent stake in AOL.

The agreement would deepen the advertising partnership between the two, letting AOL sell ads against search results on that are provided by Google. At the same time, AOL would sell display ads on Google’s AdSense program, which shows ads on other Web sites and blogs.

Reported terms of the deal include mixing AOL’s digital media properties into Google’s search index and extending’s use of Google search for five more years.

Last week, “Reuters” reported that Microsoft, Yahoo and Google all were talking to AOL about mergers or acquisitions. According to the “WSJ,” Microsoft had the edge. At an industry event that week, Microsoft CEO Steve Ballmer held to a firm “no comment.”

A Microsoft spokeswoman said the company didn’t comment on rumors. Google and AOL didn’t respond to multiple requests for comment.

According to the latest statistics from Internet audience measurement firm Nielsen/NetRatings, Yahoo remained the top Internet brand, with an audience of 103.8 million; MSN was third (after Microsoft) with an audience of 91.3 million; Google ranked fourth with 85.5 million; and AOL ranked fifth, with 74.3 million.

“The agreement sets a major milestone in the escalating war between MSN and Google,” said
Ken Cassar, director of Analytics, Nielsen//NetRatings, in a statement. “It’s clear that this event will shake up the search/portal space.”

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