Both MSN, Yahoo! and Google have been trying to get a bit out of AOL. Now Google seems to be in the lead.

Microsoft has been trying hard to get hold of AOL, mainly because it wold increase the number of people using the MSN search engine and strengthen its status as a serious Google challenger.

At the moment, Google is powering AOL’s web search and Google would like to see it remain that way.

The Wall Street Journal and Reuters both cite unnamed sources reporting that Google is in “exclusive� talks with AOL and close to an agreement. The Wall Street Journal reports that Google may pay as much as 1 billion US dollars for 5 percent of AOL.

The deal also includes the continuous sale of Google AdWords text ads on the AOL site, but what’s more significantly, Google has apparently also agreed to include ads for AOL and Time Warner web sites on Google’s own search engine result pages. These apparently includes ads with images, a first for Google.

Adding more ads to Google’s result pages will ultimately weaken the effect of the regular AdWords text ads, and a lot of advertisers will find that annoying.

Moreover, Google will assist AOL in optimizing its web pages for good rankings in regular — organic — Google results.

This does not mean that Google will change adjust its ranking algorithm to boost AOL rankings — and Google is already giving search engine optimization advice to companies — but it is a controversial move all the same.

Google’s Got AOL, Say Insiders (Direct)
Google to buy 5 percent of AOL for $1 billion (Silicon Valley.com)
Webmaster World discussion