Yow. Don't Jump the Shark, Google, by John Battelle
First, I can't believe Google actual did what is claimed (my guess is, that it is a misunderstanding).
If Google is going to give certain AOL ads different treatment (showing them when their best algorithm shows other ads have a higher value), that would be stupid (the degree of stupidity would depend on the degree of favoritism they give, in my opinion - and not a linear scale).
It is possible to give AOL a better deal without altering the algorithm - such as Google taking a smaller slice of the profit on AOLs adds. So if normally the advertiser has to pay Google a 30% fee and Google made AOL only pay a 20% fee for the same dollars from AOL and the same ranking algorithm (if it were maximized for showing the highest overall value ads - as opposed to the highest Google profit ads) then AOL would get "priority" placement but within an overall optimized system. In this case you keep the algorithm in place for showing ads as if Google were taking their normal cut but then when "charging" AOL a discount is given (or Google "pays" the normal charges to the advertiser as the Washington Post article seems to indicate).
Essentially Google accepts less. They could also optimize the algorithm for Google's profit but I imagine they don't do this now. Otherwise volume discount agreements would not be worth much. Of course, I haven't given this much thought I might be missing something obvious.
But even if Google made that decision, stupid moves are not all "jump the shark" stupid. I agree that it is not the right term to use.
Also see: Google to Buy 5% Of AOL for $1 Billion