By Charlene Li

I'm on my way out the door for a few weeks of vacation (and I don't plan to blog or check work email!) but wanted to share a few quick thoughts about the supposed Google/AOL search deal.

- The deal doesn't change the overall industry much, with the exception that AOL now has the sweet deal of selling into Google directly. It's pretty much continuation of the status quo and AOL went with the safe, proven incumbent.

- I had a chance to talk with Sergey Brin at the Google Holiday dinner on Tuesday and he (as well as other executives) were tight lipped about any negotiations (surprise surprise). As the WSJ pointed out, Google charged into the talks once they got wind that Microsoft was trying to woo AOL away. I'm not surprised that Google upped the stakes by making an investment in AOL -- what's amazing to me is they thought it was worth $1 billion. I think losing AOL wasn't so much a financial issue as it was one of ego -- there was no way Google was going to let Microsoft beat it at anything as high profile as a major partnership.

- It appears the MSFT/AOL deal fell apart because they were TOO similar and had too many conflicts that couldn't be worked out. As I noted in a previous post, the deal made a great deal of sense on paper but any cooperation on the content front would have been a nightmare. Google/AOL is much cleaner and synergistic, as Google is happy to direct traffic to AOL content.

- Speaking of content, it’s not clear what AOL is getting in terms of preferred placement on Google search results. This is extremely important, as it will be the first time Google gives any sort of preferential treatment to content because of a business development deal, or, even worse in this case, because of an investment in the company. It brings up tremendous conflict of interest issues – is that AOL Madonna video in the search results because it’s the most relevant result or because it’s part of the AOL deal?

- And don’t count MSFT out yet because they (apparently) lost this deal. adCenter has a lot going for it and will be the foundation for the new Windows Live and Office Live offerings. The AOL deal would have been a tremendous validation of the product, but in the end, its performance will speak for itself.

Happy holidays, and I’ll catch you in the new year.