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Time Warner has chosen Google as the most suitable partner for its America Online Internet unit–but the game isn’t over for jilted suitor Microsoft.

The Redmond, Wash., software giant plans to leverage its desktop market dominance to compete with Google on search and advertising, analysts said Wednesday.

After spending much of this year wooing AOL in an attempt to get its search business, Microsoft lost out to Google. Google and AOL announced Tuesday that Google will invest $1 billion for a 5 percent stake in AOL under a broad partnership that expands their existing search engine deal to include collaboration on advertising, instant messaging and video.

Google also is offering a $300 million credit that AOL can use to buy keyword-based ads from Google, and AOL will be able to sell all types of ads on Google sites and its publisher sites that display ads powered by the search giant. In addition, Google will help AOL better expose its content to Google’s Web crawler.

But given that AOL and Google have had a search engine agreement for three years, “at the end of the day, nothing much has really changed” for Microsoft, said Michael Gartenberg, an analyst at JupiterResearch. “From Microsoft’s perspective, the ability to do a deal with AOL would have been a good thing, but it was not a critical thing.”

Read full article: ZDNet News