AOL parent Time Warner is tomorrow expected to announce that it will expand its three-year-old search partnership with Google, which is expected to pay a whopping $1 billion for a 5 percent stake in AOL in a deal that will, inter alia, increase advertising opportunities for AOL on Google sites, reports the New York Times. Until the weekend, Microsoft, which is seeking to become a search and internet leader, had been considered a favorite in the quest for AOL's affections.

David B. Yoffie, a professor at Harvard Business School, is quoted as saying "AOL was the single best way to gain market share" for Microsoft, so for Google the deal was "crucial and purely defensive" because it "prevents Microsoft from being credible in search."

Google will now help send traffic to AOL's advertising-supported websites. AOL will be able to offer current advertisers search ads for the first time, and AOL's sales force will sell display advertising that will appear on Google's network.

The Times article goes on to provide a synopsis of the twists and turns of the saga leading to tomorrow's anticipated announcement, and paidContent offers a good rundown of the last few days' coverage.