AOL's Web Content and Search Widgetry: Mergers and Acquisitions in the Making

Strategic Insights -

AOL's web content and search widgetry have been at the center of a flurry of merger and acquisition talks in the technology sector. Microsoft and Time Warner have reportedly discussed combining AOL's web content with Microsoft's nascent search capabilities, while Google and Comcast have been in "serious discussions" with Time Warner about taking a minority stake in AOL's new portal. Meanwhile, Microsoft's instant messaging interoperability alliance with Yahoo has sparked speculation about Microsoft's intentions and its potential to retaliate against Google.

Key Takeaways:

  • Microsoft and Time Warner have discussed combining AOL's web content with Microsoft's search capabilities, with a potential value of $20 billion.
  • Google and Comcast are in "serious discussions" with Time Warner about taking a minority stake in AOL's new portal, with Google reportedly interested in AOL's 51.5 million IM users.
  • The potential merger could create a "powerhouse" entity that combines AOL's web content with Google's search capabilities.
  • Microsoft's instant messaging interoperability alliance with Yahoo has sparked speculation about Microsoft's intentions and its potential to retaliate against Google.
  • AOL accounted for 11% of Google's 1H revenues in 2009, generating $300 million in ad revenue for Google.
  • Prudential estimates that AOL's IM users would more than even the score if the AOL-Google deal goes through.
  • Time Warner is under pressure from stockholder Carl Icahn, who is critical of the company's "paralyzed" management and wants a seat on the board.
  • The proposed merger would require Microsoft to contribute unspecified business units, and AOL reportedly wants all of MSN.

Statistics:

  • AOL's 51.5 million IM users would more than even the score if included in the AOL-Google deal.
  • Google sold $300 million worth of ads for AOL in 2009, accounting for 11% of Google's 1H revenues.
  • Time Warner's stock price has been under pressure, with Carl Icahn critical of the company's management and demanding a seat on the board.
  • The potential merger of AOL, Google, and Comcast could create a "powerhouse" entity with significant market share.
  • Prudential estimates that the AOL-Google deal would be more profitable for Google than the AOL-Time Warner content.

Sources:

  • The Wall Street Journal
  • The Associated Press (AP)
  • The Washington Post
  • Reuters
  • The New York Times