Microsoft (MSFT) - AOL (TWX) Deal Within a Few Months

The 50+ crowd are the only ones who need this...

The deal? Or the story?

Can anyone explain to me what makes AOL so valuable?

Yes, it still has 8.7 million paying subscribers but is losing them at a rapid rate. Yes, it has a few good sites (TMZ being one of them) and a handful of function-based properties (e-mail, IM, mapping and movie guides) that are largely duplicated by both Yahoo and MSN.

AOL is also encumbered by an advertiser deal with Google, which will presumably be torpedoed in the event of an acquisition.

What exactly makes AOL so valuable?

Not sure "so valuable" applies, but some assets there are worth something:

Advertising.com / Tacoda (third-party ad businesses)
AIM
AOL Mail (user list)
Content Properties (TMZ, Engadget, etc)
Mapquest, Moviephone, etc
Others?

AOL deserves some love - Here's some comscore data.

Comscore May Programming results were released this week and they are truly phenomenal:

- Page Views grew to an all time high of 4.5 Billion Page Views
*78% growth year over year
*5% growth month over month

- Unique Visitors grew 11% year over year

- Time Spent (Minutes) grew 29% year over year

Vertical Highlights include

Ranked #1 in UVs
Asylum
Black Voices
Music
StyleList

Ranked in #2 in UVs
Horoscopes
Money & Finance
Moviefone
TMZ
TV

Ranked #3 in UVs
Latino
Food
News
Technology
Women

Ranked #4 in UVs
Health

In addition we Rank #1 or #2 in Page Views the following verticals

#1 in PVs
Finance
Men's
News
StyleList

#2 in PVs
Black Voices
Moviefone
Music
TMZ
TV
Women's

We Rank #1 or #2 in Visits in the following vertical

#1 or #2 in Visits
Asylum
Finance
Moviefone
Music
Style
TV
TMZ
Women's

All Time Page View Highs were achieved by
Asylum
Black Voices
Finance
Home
Living
Music
News
Sports
TMZ

Below are the highlights in alphabetical order for some of the verticals

Asylum
Asylum remains the #1 Men's Site in UVs, PVs, Minutes and Visits!
Page Views grew to 59 Million - an All Time High

Black Voices
continues to dominate the #1 spot in UVs each month
8 consecutive months of Page View Growth!
71% Page View growth and 95% Unique Visitor growth year over year
All Time High in Page Views (145 Million)

Finance
#1 in Visits and Page Views
87% Page View growth and 48% Unique Visitor growth and 36% Minutes growth year over year
All Time High in Page Views (526 Million)
All Time High in Unique Visitors (15.2 Million)

Food
629% Page View growth and 35% Unique Visitor growth and 514% Minutes growth year over year
First time ever hitting the #3 ranking in Unique Visitors

Games
61% Page View growth and 32% Unique Visitor growth and 12% Minutes growth year over year

Health
207% page view growth and 175% growth in unique visitors year over year
Home
6 consecutive months of Page View Growth!
1010% page view growth and 158% growth in unique visitors and 682% Minutes growth year over year
All Time High in Page Views (33 Million)

KOL
5 consecutive months of Page View Growth
70% Page View growth year over year

Latino
33% page view growth and 35% growth in unique visitors and 8% Minutes year over year

Living (Women)
6 consecutive months of Page View Growth
234% Page View growth and 93% Unique Visitor growth and 171% Minutes growth year over year
All Time High in Page Views (416 Million)

Moviefone
ranked #2 in UVs, PVs, Minutes and Visits just behind IMDB.
118% Page View growth and 24% Unique Visitor Growth and 43% Minutes growth year over year

Music
Remains at #1 in UVs, Minutes and Visits!
84% Page View growth and 50% Unique Visitor growth and 30% Minutes growth year over year
All Time High in Page Views (603 Million)

News
8 Consecutive months of PV growth
89% Page View growth and 52% Unique Visitor growth and 76% Minutes growth year over year
All Time High in Page Views (1.267 Billion)

Sports
10 Consecutive months of PV growth
156% Page View growth and 56% Unique Visitor growth and 128% Minutes growth year over year
All Time High in Page Views (298 Million)

StyleList
Ranked #1 in Style ahead of InStyle in UVs, PVs, Minutes and Visits!
All Time High in Page Views (88 Million)
All Time High in Unique Visitors (4.6 Million)

TMZ
4 consecutive months of Page View Growth
270% Page View growth and 35% Unique Visitor growth and 81% Minutes growth year over year
All Time High in Page Views (326 Million)

TV
38% Page View growth and 14% Unique Visitor growth and 21% Minutes growth year over year
All Time High in Unique Visitors (12.8 Million)

Ufff..Why don't they Fu*king fire Ballmer ?

My God, it's an AOL informercial, right here on Silicon Alley Insider. Still, I'm glad someone here has faith in the AOL future. And because I still do have some love left in my heart for AOL, here's what TWX says about AOL in its most recent SEC quarterly finding, plus a few comments and questions:

---- FROM AOL 10Q Q1 2008 ----

During 2007 and the first quarter of 2008, Advertising revenues on the AOL Network were negatively impacted by certain factors and trends, including declines in the price of advertising inventory, shifts in the mix of sold inventory to lower-priced inventory and the increasing usage by online advertisers of third-party advertising networks.

-- Uh oh - looks like that awful Ads-as-Pork-Bellies Trend is hurting the premium placement business.

Additionally, during the first quarter of 2008, AOL’s Advertising revenues were negatively impacted by the challenges of integrating recently acquired businesses under Platform-A, including certain sales execution issues.

-- Sales Execution losses? Is this code-speak for terminating sales people?

The increasing usage of third-party advertising networks has had a positive impact on AOL’s Third Party Network Advertising revenues. However, such revenues have historically had higher traffic acquisition costs (“TAC”).

-- Again, the oh-so-corrosive efffect of ad networks is in play here.

Due to the differing cost structures associated with the AOL Network and Third Party Network components of the Global Web Services business, a period over period increase or decrease in aggregate Advertising revenues will not necessarily translate into a similar increase or decrease in Operating Income before Depreciation and Amortization attributable to AOL’s advertising activities.

-- I'm not sure what this means but it sounds ominous.

The Company anticipates a significant decline in revenues from a major customer of Advertising.com during 2008 as a result of the customer’s acquisition of a business believed to perform online advertising services that are similar to those provided by Advertising.com. For the three months ended March 31, 2008, revenues from this relationship decreased to $17 million from $56 million for the three months ended March 31, 2007. For the full year 2007, AOL earned Advertising revenues from this relationship of $215 million.

-- Hmm. Dependency on a few large advertisers isn't a good thing. Who is this unhappy customer?

AOL’s Publishing business group, a component of the Global Web Services business, develops and operates the products and programming functions associated with the AOL Network. The AOL Network consists of a variety of websites, related applications and services, including those accessed via the AOL and low-cost Internet access services. Specifically, the AOL Network includes owned and operated websites, applications and services such as AOL.com , international versions of the AOL portal, e-mail, AIM, MapQuest, Moviefone, ICQ and Truveo (a video search engine). The AOL Network also includes TMZ.com , a joint venture with Telepictures Productions, Inc. (a subsidiary of Warner Bros. Entertainment Inc.), as well as other co-branded websites owned by third parties for which certain criteria have been met, including that the Internet traffic has been assigned to AOL.

-- I agree that AOL has some content muscle here. The question is how much is it worth in a world where good content is a commodity?

Paid-search advertising activities on the AOL Network are conducted primarily through AOL’s strategic relationship with Google Inc. (“Google”). In connection with the expansion of this strategic relationship in April 2006, Google acquired a 5% interest in AOL, and, as a result, 95% of the equity interests in AOL are indirectly held by the Company and 5% are indirectly held by Google. As part of the April 2006 transaction, Google received certain registration rights relating to its equity interest in AOL. Beginning on July 1, 2008, Google will have the right to require AOL to register Google’s 5% equity interest for sale in an initial public offering. If Google exercises this right, Time Warner will have the right to purchase Google’s equity interest for cash or shares of Time Warner common stock based on the appraised fair market value of the equity interest in lieu of conducting an initial public offering. The Company cannot predict whether Google will request the Company to register its 5% equity interest in AOL or, if requested, whether the Company would exercise its option to purchase Google’s interest at its then appraised value.

-- The GoogleFox is in the hen-house, and will continue to exercise influence over AOL's destiny.

Historically, AOL’s primary product offering has been an online subscription service that includes dial-up Internet access. AOL continued to experience significant declines in the first quarter of 2008 in the number of its U.S. subscribers and related revenues, due primarily to AOL’s decisions to focus on its advertising business and offer most of its services (other than Internet access) for free to support the advertising business, AOL’s significant reduction of subscriber acquisition and retention efforts, and the industry-wide decline of the dial-up ISP business and growth in the broadband Internet access business.

-- You really have to look hard these days to find people who haven't found a better way to access the net than through AOL. Is there anybody who believes that these people are a choice advertising demographic?

The decline in subscribers has had an adverse impact on AOL’s Subscription revenues. However, dial-up network costs have also decreased and are anticipated to continue to decrease as subscribers decline.

-- Great. You're going to save money by having fewer paying customers. Now that's a business plan.

AOL’s Advertising revenues associated with the AOL Network, in large part, are generated from the activity of current and former AOL subscribers.

-- So your main target for advertising is AOL subscriber Luddites? Any plans to fix this?

Therefore, the decline in subscribers also could have an adverse impact on AOL’s Advertising revenues generated on the AOL Network to the extent that subscribers canceling their subscriptions do not maintain their relationship with and usage of the AOL Network.

-- Sounds like a hull collapse to me.

Henry,

You forgot their two largest acquisitions: Bebo and Quigo!

..and Truveo

the online icebergs are aligning...the content network will pretty damn big soon...and will attract the young, old, fat, thin, trendy, black, white, latino...whatever.

like a coffee table at a busy doctors office, a collage of magazines for all different types of people. but this is on the net and the content is very good as the recent numbers are showing.

Blah blah blah. Get on with it already. We are sick and tired of waiting.

henry you have lost your mind... misleading everyone for some cash :)

We long-suffering TWX shareholders certainly deserve it! A bidding war might even get the stock back up to $16

Microsoft should just quit in general--this company will be like Nortel within 5-7 years--old, bloated, meaningless and a carve-up opportunity. They are fighting too many wars, and they are losing on all fronts--except possibly xBox.

Battles Microsoft is losing:

Middleware/DB: IBM, ORCL, SAP, RedHat/JBoss
Enterprise Apps: SAP, ORCL, NetSuite...
Mobile: Apple
Music: Apple
Consumer Aps: Google
Advertising: Google, Yahoo
OS: Linux
Virtualization: Citrix, VMWare (and this is going to shake up their business big-time. As soon as I can rent a PC in the cloud based on an open-source platform, I'm done with Microsoft forever as a consumer)

Let's face it--Microsoft is a piece of xhit. Microsoft was v1 of the PC era, but it has not adopted to the Internet/mobile era. It will become extinct and spin-off into a smaller, more nimble life form--if its lucky. No wonder Yahoo wanted nothing to do with them. Perhaps Yahoo can use the additional Google display revenue to offset a higher price for their AOL acquisition...

i think yahoo and aol are a better fit - as they are both fit for the graveyard.

Actually, MSN and AOL are a much better fit since both are really headed towards the scrap heap of cyber-space. However, I wouldn't mind a Yahoo-AOL merger.

AOL is a poor consolation prize for Microsoft. Henry is right that Microsoft can't let Y acquire AOL. Microsoft's proper response therfore should be to acquire Y. Which of course it still can.

@ Henry, I take issue with AIM being a valuable property - lots of traffic, yes, but last I checked no, it was not. If memory serves me right AOL has a hard time converting AIM users into too many $$$.

And I read this post first so I had no idea why Steve was quoted as saying it was "an AOL infomercial right here on SAI"...but now I know. Just watch out for those AOL-lovin' AOLers, Steve - some have teeth - and will go to great emotional lengths to defend their turf. I've had knockdown drag-outs with them that I still carry memories of to this day - ah yes, my poor psyche, forever marred from the consequences of questioning or criticizing their unbelievably thick-headed, sometimes fraudulent business practices. I don't know what makes some AOLers so fierce - or hallucinatory. AOL doesn't pay that much, do they?

As to who AOL should go to? Yahoo!, of course. They're the perfect blend of audiences, content, email, IM, music and video sites, etc. Better workforce blend than AOL/MS, too. MS will not buy AOL. That's my prediction...we'll see how well I fare. I haven't made one false prediction on SAI all year (yay me).

And @ Henry again:
"We long-suffering TWX shareholders certainly deserve it! A bidding war might even get the stock back up to $16"

You're Gordon, aren't you? I almost spit my coffee out reading that...

@jeecee: henry's wrong. ms should be happy to let yahoo acquire aol. ballmer could then sweep up that train wreck post-integration for 1/2 of what he first bid for yahoo.

hey henry,
are you working for yahoo or MS? I guess 'yahoo' why you always canvas negative AOL feeling to everyone who watch this site?

MS buying all of these jigsaw pieces (AOL, Facebook, digg, etc.) will still be nothing compared to Y! They'd still be stuck with no real search contender, and continue losing ground to the big G.

AOL died a long time ago (right about the TWX deal) and the current zombie incarnation really won't go very far. Even when you factor in Advertising.com, Tacoda, AIM, AOL Mail's user list, content plays like TMZ, Engadget, Mapquest, Moviephone, etc.-- ultimately it'd be like saying Google is powerful because of Google Docs or Google Apps or Google News or Google Finance. They're all nice and dandy for sure, but nowhere near where it really matters, the entire package plus the only real search contender (an extremely distant second as Y! has been) and well, Overture.

Best to keep that money and wait for Y! to tank and buy it, months after the initial halo of the Google advertising deal had passed and it loses more ground, just as everybody and their mothers have predicted.

how sad... all these terrific traffic, and just not enough money out of them..

LOL! AOL is a POS. I know cause I worked there for over 10+ years. Ever since the TWX deal the business has fallen apart. I wont bore you with my facts but take heed, run away from AOL like the black plauge.

What's up with all that Comscore data from AOL. Probably Bill I'm a fag Wilson trying to act like he's doing something. Does anyone under 65 actually use AOL ? They rank #1 or #2 and they compare themselves to 4 other major sites.

They still don't understand that it's the small startups that will destroy them. Way to drop the AOL brand name from your sites dumbasses. I think I called that in 2002 while I still worked there.

"Does anyone under 65 actually use AOL ?"

Um, yeah. I get emails from them all the time asking me how to cancel AOL's uncancellable service or how to uninstall their uninstallable software. But maybe you're onto something with the under-65 demographic being small - today an older war veteran writes to me:

"I somehow have AOL 9.0 VR loaded and it is a real dog...How dependable is 9.0 SE or other older versions...I do not like the fact when something is printed out, there is an annoying tag line from AOL at the bottom."

I couldn't read past that line - and there was a bit more to read - because I couldn't stop laughing at "How dependable is 9.0 SE?" - the worst version of AOL ever made besides 5.0.

"Yeah, why don't you throw 9.0 SE right on there, buddy"...telling him that would be like telling him how to destroy his PC - but he'd never know it until it was too late.

I honestly feel sorry for anyone who thinks there's nothing wrong with using AOL.

Only retards use AOL.

Marah Marie -

If you are using AOL you obviously haven't figured out how to use a browser. Or maybe you live in Detroit and still need dial-up. (oohhh sorry Detroit).

And don't say that their web publications are anything special. They have people sit around and watch TV all day surf other sites to put content up on AOL... What a waste of humanity.

Mountain View said:

Only retards use AOL.
---------------------

And weirdos stuck in a time warp.

And only a retard would want to work at AOL.

@AOLSucks

I'm not sure if your comments are directed at me or not but if they are, I do NOT use AOL - in fact, I'm the only person on the Web right now writing an entire blog about why AOL sucks. I simply try to help people who want to stop using AOL and are having problems doing so.

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The Company anticipates a significant decline in revenues from a major customer of Advertising.com during 2008 as a result of the customer’s acquisition of a business believed to perform online advertising services that are similar to those provided by Advertising.com. For the three months ended March 31, 2008, revenues from this relationship decreased to $17 million from $56 million for the three months ended March 31, 2007. For the full year 2007, AOL earned Advertising revenues from this relationship of $215 million.
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640-802 Microsoft (MSFT) - AOL (TWX) Deal Within a Few Months You scared me. Say it again and I'll give you a beating.

Every family has problems. Sorry to keep you waiting. 640-802 / 70-624 / 70-649 / 156-215.1 / 642-456 / 350-030

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