AOL Battle Turns on Video

As tech titans tussle over AOL, the big prize is leadership in the emerging online-video marketplace.

Industry observers say Time Warner's (TWX Quote) America Online has gained a lead in Internet video. Google (GOOG Quote) and Microsoft (MSFT Quote), bidding to join AOL in a search advertising venture, are eager to exploit that prowess.

With businesses ranging from CNN to Warner Bros., New York-based Time Warner has plenty of video to put on the Web and continues to add new content to its existing stockpile of 180,000 so-called video assets. AOL and Telepictures Productions this week announced the launch of tmz.com, an on-demand entertainment news service on the Web. In addition, AOL has started original programming, including reality shows and self-help programs, and has been adding to its archives of music videos.

"Both of these companies would benefit from what AOL is trying to build," says Cory Treffiletti, senior vice president and strategist at Carat USA, a New York-based advertising agency, in an interview. "The future is video. More importantly, it's video that can be transmitted to any number of devices. They are poised to almost leapfrog anybody else from a video perspective. They have finally figured out how to leverage that Time Warner relationship."

Both Google, the No. 1 search engine, and Microsoft's MSN would benefit from AOL's expertise in video search as they try to expand into mobile devices, he says. Google is testing a video search offering. MSN's video search, which includes music videos, lags AOL Music in popularity, according to data from comScore Media Metrix. AOL's videos are spread in several areas, so it's difficult to measure their popularity.

"It's top of mind for everyone inside of the industry whether you a supplier of content, whether you are a buyer of advertising or a marketer," says Brian Wieser, senior vice president and director of industry analysis at Interpublic Group's (IPG Quote) Magna Global. "Advertisers are interested in being associated with searchable video."