Google has agreed to pay $1 billion to take a 5% share in AOL. AOL is Google's biggest customer, accounting around 10% of Google's revenue. Most of that revenue comes from the ads Google distributes on AOL's Web site. The deal is a stick in the eye against Microsoft, which was also in negotiations to invest in AOL.

The ad deal is important to AOL as it moves from being an Internet service provider to becoming a portal, competing with Microsoft and Yahoo. Part of the deal calls for AOL and Google to work towards making their separate instant messenger services interoperable. That part of the deal is another blow to Microsoft, which hoped to strike a deal with AOL to make its MSN Messenger work with AOL Instant Messenger.

Google Press Release