AOL, the milk glass of the mass media

AOL, the milk glass of the mass media

Summary: It's what will support the revenue model on top of the pipes that is the prize that the new AOL bidding points to.

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TOPICS: Cloud
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Like an odd piece of pottery -- plain but useful -- that turns up every few years at the same country fair auction, AOL finds itself on the public block once again -- and fetching some pretty snappy bids. I say public auction because business transactions of this sort, on the $5 billion to $10 billion plane, are usually kept hush-hush until all the  Ts&Cs are firmed up.

But some "people close to the negotiations" keep blabbering about whether Microsoft's MSN or a Google-Comcast cabal are the latest and highest bidders for a fecund AOL, or parts therein. Funny how these leaks are fed to the New York papers. Must be a large Time Warner stock holder intent on both pushing up Warner's stock while also setting off a bidding war among those in need of plain but useful pottery.

It was only a year or two ago that this particular piece of pottery was deemed too fragile to hold much water. And it provoked quite a large write-off, if I recall. Yet once again the IT landscape has shown, particularly when it impacts the mass media, how swiftly and forcefully it can shake and shimmy beneath us. AOL remains attractive anew for the same reason as before, only in a different way. It's about eyeballs, the mass market types of eyeballs that AOL has been able to attract and hold, despite the dissing from fancier and more hip Web properties.

AOL's latest ability to provoke acquisitive interest involves how to hasten the bell curve bulge of typical fly-over states US households to the broadband, converged communications-media, contextual-ad wrapped services future. The portal wars gave way to the search wars (still under way), but what makes this latest pending AOL transaction different is that it portends the next war: the services-in-the-cloud wars.

It's sort of paradoxical that businesses and enterprises that have had fat pipes for years are stuck in older applications and objects usage patterns. It's now clear that consumers and households -- via swift mobile and landline Internet access -- will be on the vanguard of the new order. And when all the worker bees are using free Web services to get their entertainment, communications, and e-commerce work done cheaply, then the boss bees in the enterprises will smarten-up to the fact that they too can dump a lot of those expensive servers and on-premises data centers and get a lot of what they need off the cloud for a song, too.

So after numerous parries and missteps on whether it will be dial-up, or cable TV, or DSL, or satellite, or Wi-Fi, or EVDO, or G3, or CDMA, the next fat pipe thing, the agreement seems to be ... whatever! Any combination of these bit pipe onramps and offramps to the Internet will do. Any of the major news and email-IM portals will do, too. VOIP and IPTV for everyone! They are baseline albeit necessary functions, and will proceed to consolidate to high-volume, low-margin commodities. We are in agreement.

It's what will support the revenue model on top of the pipes that is the prize that the new alleged AOL bidding points to. And it is not monthly connect fees, that is so last millennium. It is not display ads, nor page-views either. It is not classified ads. It is not Budweiser trying to convince me it's the king of beers because some big horses march across my HD screen. It is not T&A glossies to try and get me to part with $400 for a hunting knife. (Thank you, Mad Magazine, for teaching me about advertising and mass media when I was 12.)

No, it's going to be quite different. Because soon enough as a consumer someone (SBC, Verizon, Comcast et al) is going to make me an offer I cannot refuse. They will say, Dana, for $180 per month (three-year contract) we will be your one and only packet supplier. You will get local and long-distance telephony (I now pay $90/month), cable TV of the usual 500 channels and pay-per-view movies (I now pay $65/month), the equivalent of TiVO, Netflix, and iTunes (I now pay $41/month), cable modem high-speed Internet (I now pay $45/month), and unlimited household cellular telephone service (I now pay $90/month) -- all for $180, charged to your credit card. And you can access all of this from any device -- home or away -- that you want to.

When I compare that to the $331 I now pay per household (how did it ever get to that!) per month for disjointed services that require their own specific edge device, I will say ... YES, please. And once that deal is done by 40 million or so households, critical mass is reached ($86.4 billion market), the number of providers settles in at three per major national or regional market, and then we're on to the new services revenue model.

And Google more than anything else right now smacks of that model. The ultimate profit margin for the bit pipe providers will come from contextual links, unobtrusive and relevant ads, and wanted services interspersed within all the packets that I receive. And they will be intelligently associated to just me based on what I am doing, authenticated through my one and only bits supplier.

And when you look at it that way, Comcast+Google+AOL=a faster track to the future for them versus any of the competition. So how much would you pay for AOL, the milk glass of the mass media?

Topic: Cloud

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