Time Warner Inc.’s AOL and Google Inc. have entered exclusive negotiations over a deal that would have the search giant pay $1 billion for a 5% stake in AOL, deepening their advertising partnership, according to a person close to the situation.

The talks shut out Microsoft Corp., which has been wooing AOL since January.

As part of the deal, AOL would be able to sell advertising among the search results provided by Google on AOL Web properties. AOL’s sales staff would also sell display ads across Google’s network of Web publishers.

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