Right now the big search news is Google’s second stock offering in which they sold over 1.4 million shares of stock at $295 a share for around $4.2 billion. That’s a lot of money. There’s another story floating though that might be bigger and that’s the negotiations of TimeWarner with Microsoft for AOL.
The New York Post reported this morning that two sources familiar with the situation said that Time Warner is in talks with Microsoft about selling some of its share in AOL, combining MSN with AOL, which would change the dynamic of the search world dramatically. At the time of this writing, Time Warner had not gotten back to Murdok with a statement and a Microsoft spokesman had no comment at this time.
The Post also mentioned however, that while talks are most advanced with Microsoft, they could fall apart and that Time Warner has also talked to both Yahoo and Google although the wizards in Redmond are the preferred choice.
This would drastically change the search world for multiple reasons. AOL has recently shifted from being primarily a dial-up service to a portal. Having lost over 4 million subscribers in the last couple of years as many users switched to broadband, many higher-ups at Time Warner say AOL as bit of a problem.
Now AOL, as the number 4 search and portal site, ranks high in both numbers of unique visitors as well as the length of time spent utilizing their site. This puts them in direct competition however with MSN, Yahoo, Google and others. AOL has added a lot of great content recently, including the Discovery launch. They announced yesterday they’ll be running a reality TV show for their teen audience as well as a college football game between Tulane and Miss. St.
Time Warner has had problems getting their stock prices up and this might just be one way to do it. Corporate raider Carl Icahn bought huge chunks of Time Warner stock and has been pressuring the board to make some tough choices to get the price back up. The media conglomerate merged with AOL just for that purpose and it didn’t work out. They eventually dropped the AOL from the name and now they’re looking to spin at least part of it off.
In the search world, this will have even more dramatic effects. If MSN and AOL merge their resources, it would create quite the large entity and the question to ask would be what would stay and what would go, if anything. In the market, the two brands directly compete against one another. MSN offers a lot of services that AOL really perfected several years ago. Would some of the MSN product line be dropped in favor of AOL?
But this would also give Microsoft added layers for some of its ad programs and other things. This would greatly expand their audience, particularly since AOL has made a concerted effort to go for the youth market, which brings me to further speculation.
Microsoft announced today the Xbox360 would hit stores on November 22nd. They preached that the new console will be an all inclusive entertainment center with games and a DVD player but now, besides their gaming channels for networked play, they also have an entertainment channel with original content through AOL. Since AOL will also still have Time Warner in there too, it could perhaps create a portal for Time Warner content, which has nearly a century’s worth of movies, TV programs, and other content to feed.
Let’s go even further on this. Microsoft has been investing heavily in the development of IPTV or internet-based television programming. They’ve dealt with companies like Motorola and Scientific Atlanta, makers of receivers for cable television, in that development. Now, the test market might just be available in the U.S. for such a venture, namely the Time Warner Cable systems and it could happen via a version of the Xbox.
So let’s recap. Time Warner and Microsoft are currently in advanced negotiations over AOL to become equal partners in the company. Then Microsoft begins combining their research and development with the content and networks of Time Warner to provide the consummate home entertainment product for all purposes in the future. It’s not that far off when you start connecting a few dots. Where this will leave others remains up in the air. The thing is, while some may see this idea as a little crazy, it fits in with much of what Microsoft has discussed in some of their visionary statements. Now I just hope I’m right.
Think that would make Microsoft too big? Want someone else to help Time Warner handle the AOL machine? Tell us about it in the Search Engine Insider Reports at WebProWorld.
John Stith is a staff writer for Murdok covering technology and business.
