Google is to be handed a say in the future ownership of AOL, Time Warner’s troubled internet business, in return for agreeing to buying a 5 per cent stake for $1 billion.

The world’s leading search engine will be given minority shareholders rights that protect its position, allowing it to exit, should Time Warner's strategy change or if AOL runs into trouble.

Full details were expected to be announced at 9pm GMT tonight, after Time Warner’s board met to formally approve the transaction, which will see a transformation of Google’s simple search strategy.

Time Warner has been holding talks with a group of search engine providers as part of an attempt to extract value from — and drive traffic to — AOL. Last week it opted to do a deal with Google instead of Microsoft.

AOL already uses Google’s technology to provide internet search, and on some estimates is generates as much as $500 million in annual revenues for the search engine, whose total turnover was $4.2 billion in the first nine months of 2005.

Had Time Warner switched to Microsoft, owner of MSN Search, it would have given a major boost to one of Google’s rivals, creating a powerful third competitor to Google and its main rival Yahoo!

Google is expected to introduce banner ads on its web site for the first time — branded by AOL — a major shift for a company that built its business on a simple home page and low-key advertising which was easy for surfers to download.

AOL is also likely to receive help from Google in optimising its site, which would boost the ranking of its content in response to a search query. Although Google has created a lucrative business in selling ads, most people click on one of the general search results rather than an advert to find what is required.

Anthony Noto, an analyst with Goldman Sachs, warned that there could be "a backlash for Google it it gives special treatment to AOL to help it improve its search placement and allow it to be the only branded advertiser on its site". He warned that negative press coverage could persuade surfers to conduct their searches elsewhere if they felt the results were no longer objective.

AOL was briefly large enough to buy Time Warner as part of the "deal of the century" that created the first integrated internet and media group. But the once fast-growing dial-up internet provider lost ground as subscribers switched to faster broadband services supplied by cable and telecoms companies.

Under Richard Parsons, Time Warner’s chief executive, the company has tried to reinvent AOL as a popular internet destination, making money by selling advertising. However, the growth in advertising has not been enough to stop the losses in turnover from subscriber defections. In the first nine months, AOL’s turnover declined 3.6 per cent to $6.27 billion.

Time Warner hopes that the deal will also help stave off a rebellion led by Carl Ichan, the activist investor, who controls about 3.1 per cent of the stock. Mr Ichan wants to see the company break itself up into four, and added that he thought that the prospective Google deal was "a disastrous decision".

Ahead of the expected announcement, Time Warner shares were down 1.2 per cent at $17.73

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