Friday, rumors contend that the AOL/Google deal was still very much, an unsure thing. In fact, some sites suggest the decision, at the AOL offices in NY, was made while AOL folks shuffled between Steve Balmer (Microsoft) and Sergey Brin (Google) in offices separated by only a few walls.

Whatever the case, one thing is now for sure; AOL went with Google and Microsoft was left out in the cold.

Consider: The strike price for Google’s investment is $20 billion. Google owns 5% of that, or $1 billion. So let’s do the math (again, watch out here, check my figures…). Google is on track to do more than $6 billion in high growth revenues this year, and it has a market cap of $130 billion. AOL will have far more revenue this year (it did $2 billion this past quarter and more than $8.5 billion last year), but due to the subscription/access business, it is not growing nearly as quickly. But a market cap of $20 billion? On revenues of more than $8 billion? That’s less than 3x revenues!

If AOL goes public and is seen by by Wall Street and others as the equivalent of a cheap ticket to Google revenue, it may well pop into Yahoo like valuations - to $50 or 60 billion in market cap or more. If that happens, Google’s makes a cool $2 billion on its 5% stake - close to what it made when it first went public. And this time, they don’t even have to do a road show….

Even though AOL is not what one would consider a popular company, it’s one that’s poised to take on Web 2.0 in a very user-friendly way. Consider these reasons AOL is attractive to Google (and everyone else).

1. Loads of Subscribers - Though this will probably change as users finally figure out how to cancel their accounts, right now they control a large amount of eyeballs.
2. Weblogs, Inc. - Don’t discount the beautiful deal they made to purchase this prolific blog network. Engadget, their hottest blog, is the number one blog right now (according to Feedster’s Top 500) and is never out of the top 5.
3. Video/Audio - AOL has always been a good place to find audio/video and with TimeWarner’s content, they’ll always have plenty of rich media to hype and display.

Most important to Google though, is AOL search. They utilize Google and Google’s Ads to bring in revenue. If you realize Google already brings in around 10% of it’s OVERALL revenue from this deal, they simply could not lose AOL. So, Google paid $1B (roughly) for a 5% stake in AOL to keep the advertising revenue. The other stuff is merely icing on the cake.