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.