Who will get AOL's swing vote? Ask Bambi...

Who will get AOL's swing vote? Ask Bambi...

Summary: It's been quiet so far this week on who (Microsoft, Yahoo, Google or...)?

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aol.jpgIt's been quiet so far this week on who (Microsoft, Yahoo, Google or...)? will end up giving Time Warner a large dowry for AOL, but Bambi Francisco is on the case. In her MarketWatch column today, Bambi suggests that Google and Comcast would be the most logical suitors, and backs it up. AOL generates about 10 percent of Google's revenue, and the Googlers wouldn't want to see that revenue go elsewhere. AOL also has more than 20 million subscribers, many of whom are ripe for broadband contracts (hello Comcast), and almost 50 million IM users. According to Bambi's article, AOL has almost double the IM users of MSN and Yahoo, and nearly 50 times more than Google. At the same time AOL is worried about Skype in the IM/IP telephony arena.

Will it come down to who wants to pay, or give, the most or does AOL/TW have a more synergistic plan in mind? AOL's domain is like the Louisiana Purchase (the 800,000 square miles cost about $15 million in 1803 dollars), except this time the sellers have a better idea of what it is really worth and don't need the funds to support military ventures. I would bet against' Bambi's pick, but Microsoft, in pursuit of Web-ness and with $40 billion in the bank, could just decide to make an offer that Time Warner's board couldn't refuse...

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  • Time Warner is a cable company.

    Time Warner also has content.
    They also rejected the suggestion that the cable properties be spun off entirely.

    Comcast is a cable company in pursuit of content, as shown by the company's interest in Disney.

    Why should Time Warner be especially likely to help a competitor in cable get the content it wants?

    There's a piece missing here.
    Anton Philidor
    • Time Warner Is NOT A Cable Company!

      You need to look at the larger picture here.

      Time Warner Cable is but a portion of the Time Warner empire. Time Warner is not a cable company; Time Warner is a MEDIA company.

      Think about that a moment.

      Time Warner is (presumably) selling AOL. AOL's content is almost entirely media created by Time Warner. Time Warner sells AOL to Comcast, Microsoft, whomever. Unless whomever buys AOL does some seriously shrewd negotiation, or Time Warner is feeling really desperate about dumping AOL off, the content belongs to Time Warner, not to AOL. The buyer doesn't get content; they merely get an avenue with which to push their own content.

      Basically, Time Warner would be gettin' out while the gettin's still good, what with how AOL has been having to rely more and more on ad revenue to keep itself afloat . . . and that business strategy won't last forever, especially with competitors devouring an increasing percentage of those revenues. Better to cash in now, while the company is going through a phase of looking marginally profitable. If they're lucky, they'll get the double-benefit of watching AOL become the albatross around their competitor's neck, as whomever buys it fights to find compelling content to maintain the dwindling active subscriber base.

      Of course, if Microsoft buys them off to, figuratively and perhaps literally, bulldoze it and put a parking lot over it in order to get rid of a competitor, all bets are off there. But at least Time Warner would be able to cash in on things while they can, something they may not be able to do for much longer.

      Time Warner is far more than just a cable company. They feed the media to AOL. Without Time Warner doing that, the onus will be on whomever buys it to -- should the competitor choose to maintain it -- find their own content to start feeding AOL, and keep those ad revenues up to cover the subscriber revenue shortfall, or watch AOL start bringing them down the way it nearly brought down Time Warner but a few years ago.
      Whyaylooh
      • You're assuming Timne Warner wants to sell AOL.

        If that were true, if Time Warner wanted to give up ownership entirely, then you'd have a point. But the articles I've seen are about agreements with Time Warner, not sale.

        The strategy appears to be selling a minority stake, if any, and making available another piece to the public as a stock offering. This makes sense because AOL obtains cash, but Time Warner receives the majority of the payment for its content.

        Put those aspects together, and AOL is more than fully valued. But we'll see.
        Anton Philidor