Eyeing a possible three-way partnership that could dramatically alter the Web portal space overnight, search giant Google and cable company Comcast are reportedly talking about acquiring a minority stake in America Online.
Under the reported deal, the two companies would buy a minority stake in AOL from parent company Time Warner. In one sweep, such a move would enable Time Warner content to continue to flow through the portal, give Google an instant presence in the space that it has been building toward with in-house developments over the past year, and give Comcast a new distribution channel for its programming as well as access to millions of potential customers for its high-speed broadband services.
Perhaps as importantly, such a move would block Microsoft from linking AOL with its own MSN, a merger that would create a portal powerhouse and one that has been reportedly been the subject of intermittent talks between Time Warner and Microsoft in recent weeks.
Time Warner is said to be considering a scheme in which it would spin off the AOL unit in an initial public offering while keeping a large share for itself. The Wall Street Journal reported that Google and Comcast may be offering around US$5 billion for a stake in the spun-off company.
Comcast’s involvement may be a way for Google to find a partner to take on the part of the AOL business that it does not want — namely the subscription Internet service provider portion of the business. That segment has been losing subscribers for several years now amid the rise of broadband and lower-cost competitors.
Time Will Tell
All of the companies involved refused to comment on the widely reported talks. Search Engine Watch editor Gary Price said the news is not surprising. “It’s war out there, especially between Microsoft and Google,” Price wrote in his blog.
One area of synergies would be TV advertising on local cable channels. With the partnership in place, “an ad on Google could also get you an ad on a Comcast Cable System.”
According to Nielsen/NetRatings, MSN, Google and AOL ranked as the third, fourth and fifth most popular Web brands, respectively, during September. If AOL was to link with either MSN or Google, it would instantly create the single busiest Web property.
A merged Google-AOL would attract some 107 million unique visitors monthly, or 72 percent of all U.S. Web users. An MSN-AOL linkup would draw 118 million visitors each month, or 79 percent of the total U.S. Web population, NetRatings said.
But Jupiter Research analyst Gary Price said AOL may be best off right where it is — “in the warm embrace of the world’s biggest media company.”
The portal space has been the focus of several major changes recently.
AOL.com re-launched as an open Web property over the summer and earlier this week, MSN and Yahoo agreed to work to make their instant messaging platforms, a key piece of any portal, compatible with one another. Some analysts say that partnership could clear the way for free voice communication among those major portals as well.
While Google has yet to formally toss its hat into the portal ring, analysts say a number of its recent moves, such as offering the ability to customize the Google home page and upgrades to news search and other content-oriented products leave little doubt that it’s headed that way.
And if it is, Google will likely need access to a store of content to be able to compete with Yahoo, which spent years forging content-related partnerships, and AOL, which has the Time Warner kingdom — which includes books, music, movies and TV shows — behind it.
Others see more long-term goals at play. John Battelle, a search marketing expert who wrote a recently released book on Google, said the brass ring may have as much to do with instant messaging and by extension, voice chat and voice over Internet protocol (VoIP) as with near-term goals.
“If Google struck a deal with AOL, they could defend their fledgling toehold in IM, and extend it to one of the largest installed bases in the world,” Battelle said. Meanwhile, Google would also get “critical” assets such as access to strong Web traffic and content as well as millions of new users who could become adopters of Google search and desktop technology that would in turn grow its advertising revenue.