The Battle for AOL Heats Up
(Page 1 of 4 )
It’s no secret that Microsoft has been drooling over AOL for over a decade. It is rumored, in fact almost legend, that Bill Gates once threatened AOL’s then-CEO, Steve Case, in the early stages of building the online service: "I can buy 20% of you or I can buy all of you."
Since January of this year, MSN has been in talks with AOL, pushing the online service to utilize their search engine instead of Google’s. But now in the face of recent events going on at Google, will these talks escalate? The AOL-MSN talks have been temporarily suspended, with no agreement having been reached. Those talks have included various discussions including pay-for-placement advertising, and of course using MSN databases for AOL search.
The Wall Street Journal (WSJ) reported last week that, “AOL and Microsoft once were fierce rivals, and the rapprochement indicated by the talks shows how much the Internet landscape has changed. Just a few years ago, AOL and Microsoft battled over dial-up Internet customers and Web browsers. Now the dial-up business is in decline and the big prize in the industry is advertising revenue, an area in which both AOL and Microsoft lag behind Google and Yahoo Inc… The talks also signal a strategic shift for Time Warner, which had long resisted pleas from some investors to get rid of all or part of its ailing Internet arm, which came to the company when the old AOL bought Time Warner in 2001 in what became a disastrous merger. Time Warner Chairman Richard Parsons declared last year that the company wouldn't sell or spin off AOL "any time soon," citing the promise of capturing a greater share of the Internet ad market.” The WSJ goes on to say that even though AOL reports a steady decline in subscribers, the unit still generates lots of cash.
Last week, the $4.1 billion that the search engine giant, Google, raised in a secondary stock offering, created speculation about what the search engine company plans to do with the money. One report suggests that Google is planning to bid on AOL too. Is this idea so far-fetched? Not if you consider that AOL’s ad offerings make up a whopping 12% of Google’s ad-driven revenue, which translates to about $382 million. If AOL defects to MSN, then it will decrease Google’s earning per share between 5 and 10%, according to the WSJ. Losing this much revenue at a time that Google has many irons in the fire could really hurt. After going public just over a year ago, Google’s stock (GOOG) has been trading at an average of $117.80 - $319.22 per share over 52 weeks, compared to MSN’s (MSFT) average of $23.82 - $30.20 per share over 52 weeks, and Time-Warner’s $19.90 - 15.82 per share over 52 weeks.
Next: Impact on the Search Market >>
More Search Engine News Articles
More By Jennifer Sullivan Cassidy
