Internet search engine Google entered into exclusive negotiation with Time Warner's America Online (AOL ) over a 1 billion USD investment on an online ads deal Friday, according to reports from New York.

Sources say Time Warner Chief Executive Dick Parsons has agreed last weekend that Google would get a 5 percent stake in AOL for 1 billion USD and The proposal will be submitted to Timer Warner's Board of Directors December 20.

Sources say the deal could be finalized next week when Time Warner's board meets in New York.

Affected by the news, both Google and Timer Warner's stocks went up last week. Google's stock jumped to 430.15 US dollars, an increase 7.62 US dollars or 1.8%. Time Warner' stock went up by 16 cents to 18 dollars, up 1%.

AOL's alliance with Google proves to be a big hit for Microsoft. According to reports, Microsoft, which increasingly views Google as a fierce rival, has been negotiating with Time Warner since early this year.

However, what is unexpected, Timer Warner notified Microsoft last Friday that it annulled Microsoft's proposal. Negotiation between Google and Time Warner began September this year.

According to reports from US Securities and Exchange Commission, 10% of Google's ads profit comes from partnership with AOL. Analysts predict that AOL will contribute to 2% to 4% of Google's net operating income.

Latest statistics show that Google's annual ads profit reached 12 billion US dollars. Once AOL-Google deal is reached, Google will gain more ground on the display ads market and enjoy a longer lead over its rival Yahoo!.

By People's Daily Online