Will the AOL-MSN talks outcome point to a new era in vendor-network synergy?

Will the AOL-MSN talks outcome point to a new era in vendor-network synergy?

Summary: I predict that Microsoft will win in this mega ménage-à-trois, turning it into a long marriage between itself and Time Warner.

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TOPICS: Microsoft
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After reading Steve Case's op-ed piece in the Washington Post this weekend, one gets the impression that how Time Warner goes with AOL -- a sweet deal with Google or a sweeter deal with Microsoft -- portends sweeping and frightening changes in the mega-corporation keiretsu landscape.

The stakes if Microsoft wins -- no doubt by mere show of loot -- are extremely high. Microsoft becomes the search engine for AOL, replacing Google, but it means so much more. Microsoft's MSN plus AOL becomes the largest block on the Web Monopoly board, right next to Park Place and Boardwalk. I predict that Microsoft will win in this mega ménage-à-trois. Do not past go. Do pay MSAOL (pronounced mass-hole) for those gizzillions of AOL-audience generated Adword-type clicks. Yahoo! and Google have to settle with a hotel on St. James Ave. and a new house on Mediterranean, respectively. Ouch.

It sure looks like Microsoft is up to its old tricks of removing the oxygen (read: revenue) from a competitor as a way of competing with that competitor when that competitor is actually winning on the merits of its business savvy and market acceptance. But Microsoft with one deft move by out-bidding Google for AOL's affections not only squelches the oxygen flow to Google (and perhaps precipitates a long slide in Google's stock price) but creates a new monster partnership with Time Warner that recasts the how media, software, telecommunications, cable, and the Internet relate.

On the other hand, if Google wins and the AOL-Google synergy is consummated for years, Google hands off more and more revenue to AOL, and MSN remains third man out on search, a field that does not need a third player much. Google continues to grow rapaciously and AOL continues a slow slide to further irrelevancy, but Time Warner pulls out some nice recurring revenue from Google despite that inevitable slide. Maybe AOL even rides with Google to a new media-services day, doing no evil as they make real good money and wean Time Warner off that dreaded old mass media display (read: Vegas) advertising model.

And so Richard Parsons, Time Warner CEO, is in the catbird seat, playing Google off of Microsoft, and vice versa. Parsons needs to get his company's stock up as far as he can for calendar 2005, to help dim the stain from the blot of red investor ink he helped spill over the past years. I therefore expect a deal before the year ends.

Indeed, it must be a hard choice facing Time Warner's board: choosing between two good options always makes for the most difficult decision. Google or Microsoft: David or Goliath: stock or bond: Mary Ann or Ginger.

Yet this is about so much more than Time Warner's progress report and even Parsons's legacy and reputation. Case seems to appreciate that. This is really about whether Microsoft has a new lease on life, or not. Really. The decision also has huge implications for telecommunications and entertainment -- for all IP packet traffic monetization. It could well be the deal of the decade, if not the first half of the century. Really.

First, I predict that Microsoft will win in this mega ménage-à-trois, turning it into a long marriage between itself and Time Warner. And I believe that, despite Steve Case and Carl Icahn's rants, that AOL will remain tightly within the bosom at Columbus Circle, Time Warner's New York address, for many years to come.

I also predict that the search engine swap at AOL is mere Window dressing for a much larger corporate synergy between Microsoft and Time Warner -- both titans in their respective world classes. MSNBC was training wheels. And the anti-trust people won't need to be called in, for this is no M&A activity, it's a keiretsu kinda handshake kinda thing. I knew Hailstorm Web services would come in handy!

But what really intrigues me is that if Microsoft becomes a tier-one technology partner to TIme Warner, and if contextual ad-supported consumer services in a packet-driven world are the new coin of the realm, and if the media and advertising worlds need to realign to find alliances against a common and mammoth new foe -- that being MS-TW -- then what will that post-mega-media-keiretsu-deal world look like?

It could well mean that a lot of people in a lot of industries will need to pick new sides, and find new partners, just like what happened in enterprise software 12 years ago.

Topic: Microsoft

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8 comments
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  • Microsoft out of content?

    As long as we're speculating, let's look at whether Microsoft wants to be in the content business, running a portal that competes with Yahoo and AOL and, eventually, Google.

    Why should they?
    Software as services needn't include entertainment.

    Trade Microsoft's media holdings, such as they are, for the right to produce all of AOL's software, which they contract out, including to Microsoft, and you have a mutually profitable arrangement.

    If MSN Messenger and AIM merge, for example, imagine the advertising possibilities. And with Microsoft providing search for AOL, as noted in the article, an ad buyer could get a range of exposures to the public.

    The deal would be complicated, but very beneficial to both sides.

    If people considering the possibilities look at Microsoft not as a source of money but as a supplier of software and seller of products the possibilities increase dramatically.
    Anton Philidor
  • Sad days a coming!

    With the security companies, graphics companies, telecommuncations companies, etc., etc. merging into huge conglomerates again (havent' we been here before!) -- and now with this potential change of allegience -- it won't be long till the old 'oil' companies and telephone companies that were broken up by antitrust will seem like small potatoes.

    This bodes very badly for individuals. Don't get me wrong, capitalism is a good thing, when done right. When acomplished with compassion for one's fellow man/woman/child, and if the Golden Rule is firmly held in mind at all times -- think about the oil company TV statements during/after Katrina regarding 'futures' pricing and their twisted logic as to why they should be able to get whatever pricing they think the market will bear despite the catastrophe created by the hurricane -- and despite the artificially inflated value of their products by the stock market 'big thinkers.'

    Greed has become too big a motivator here and around the world.

    It will definitely be whatever the market will bear, with no thought to how this will impact individuals, only the bottom line.

    The rentware concept is fast taking over. No one will own anything and everyone will pay their entire paychecks into the multitudes of 'monthly' payments for every little thing they need, want, do!

    Think it's bad now? It will undoutably become increasingly worse and worse as time goes on, especially if something like this MSAOL is allowed to happen.

    Just my two cents.
    LilBambi_z
    • If Google were to buy AOL

      The results would be disasterous. Ads everywhere, and can you imagine the AOL users? Popup blockers that work every EXCEPT a site with Google Ads.

      At this point I would hope it's MS that buys AOL as I would believe MS would actually be the LESS intrusive of the two...
      John Zern
  • such a broken record...

    I was at netscape when AOL bought us. The new age of Internet platforms was the claim. Right! then when AOL-TW came to be - the new Media Giant. Right! Now it's the same all over again. these are minor chess moves. Without a major revamping of technology (i.e. - make it as easy as TV is today), packet sizes, formats, and bandwidth delivery to the masses (not just in Silcon Valley, Boston, and the major cities), you will not see any of this claimed Media Monstrosity come to fruition. Sorry ZDNET - but I have yet to see anyone make a SIGNIFICANT amount of revenue AND change the face of the business at the same time.

    If there is no innovation - then it's just shuffling of money and a bunch of promises... and the analysts should know better by now..
    olegc
  • AOL is lame

    Why would anyone want to buy AOL?
    duclod
    • It may be lame, but it's $$$$!!!

      How about millions of users who either don't know any better or refuse to change for whatever reason. My girlfriend and her family are all of AOL. They refuse to change because they know how to use it and don't want/can't learn anything else. I detest AOL, but when I'm at her condo, that's what I have to use if I want to get on-line. My log on is "anything is better." Her entire family is that way. They won't even consider anything else because everyone in their family in the country is on AOL. I'm sure there are milllions of people through out the world just like them. It doesn't make it right, or smart, but it's reality and that adds up to big $$$.
      Gerry_z
    • It may be lame, but it's $$$$!!!

      How about millions of users who either don't know any better or refuse to change for whatever reason. My girlfriend and her family are all of AOL. They refuse to change because they know how to use it and don't want/can't learn anything else. I detest AOL, but when I'm at her condo, that's what I have to use if I want to get on-line. My log on is "anything is better." Her entire family is that way. They won't even consider anything else because everyone in their family in the country is on AOL. I'm sure there are milllions of people through out the world just like them. It doesn't make it right, or smart, but it's reality and that adds up to big $$$.
      Gerry_z
  • You're wrong, no you're right!

    Well, Microsoft didn't get the deal with AOL, so they lost -- but Google hands back 80% of its AOL revenue in hopes of some future "synergies" (does anyone really believe in that anymore..?), so Microsoft wins!

    We're all having our cake and we're eating it, too.
    broper