Google Wants a Piece of AOL?

minuszero writes "BBC News is reporting that "Google is said to be in talks with media group Time Warner about a stake in its internet service provider, AOL." Talks are reprted to be in the early stages still, but one possibility is a "three-way joint venture to house AOL's content offering, with Time Warner retaining a controlling interest." Current estimates for this sort of move are around $5bn. The article also claims that Microsoft has also shown interest in tieing up MSN and AOL services." Clearly Google's interest in AOL is their huge CD distribution system, widely regarded as the most advanced in the world as demonstrated by my mailbox.

Comments

Take bets now M$ vs. G....

[AlltheCoolNamesGone]

There can be only one!

Seriously in the long run it doesn't matter who (if any of the two) wins, the fact that there is competition now will hopefully mean better products, innovation and hopefully an overall better deal for the consumer.

More on topic I don't think it matters who buys AOL I don't think either company is going to do anything else than cross plug there own products....

Re:Take bets now M$ vs. G....

[bedroll]

More on topic I don't think it matters who buys AOL I don't think either company is going to do anything else than cross plug there own products....

Well, perhaps Google would then be able to convince Time Warner that federating IM is worthwhile. If that's the only thing that would happen from this then I'd be happy about it. Especially with MS and Yahoo! supposedly teaming up.

Do No Evil

[Bimo_Dude]

How will google reconcile any partnership with Time Warner with their policy of doing no evil?

Re:Do No Evil

[MaestroSartori]

They can get AOLTW to be evil for them, thus separating them from the actual evil itself while having the evil done regardless? :D

Re:Do No Evil

[tez_h]

Uh, are you claiming that they're outsourcing their evil?

That's a work of (non-evil) genius!!!

Mwahahaha!! Ooops.

-Tez

Re:Do No Evil

[Narcissus]

Are they required "by law" to maximise profit, or only to do "as desired by the shareholders"?

I mean take a hypothetical: a majority of the shareholders decide to donate all income to an orphanage. Now are you saying that by law they can't do this, as this would not maximise profits?

Surely so long as they are doing what the majority of shareholders want, then there is no requirement to make a profit, right?

Re:Do No Evil

[Idarubicin]

Google is a publicly traded company. They by law has to maximize the profits for their shareholders. There is a difference between being ethical and being legal.

As others have already noted, Google is legally required to obey their corporate charter. In some cases this will mean maximizing profits, but that isn't always true.

Also, sound and responsible management may involve foregoing short-term profit for long-term gains. Moving all the staff into smaller cubes and replacing them with temp contract workers will result in a short-term bump in net earnings, but it will cost a software company in the long-term when they can't attract or retain experienced and competent programmers.

Finally, one of Google's most valuable assets is intangible; Google's reputation for being both innovative and not evil has made them the darling of programmers, engineers, and even Wall Street. Tarnishing their reputation for being 'not evil' would be hurting the brand name and identity that they've worked so hard to build. The guys with the money invest in Google because Google can attract the best engineers, programmers, designers, and thinkers on the strength of Google's reputation. Damaging that reputation would be a grossly unsound move for management.

Google's interest...?

[Anonymous Coward]

Surely their interest would be in Microsoft not acquiring AOL and slashing Google's revenue stream by replacing the "AOL" (read Google) search service with their own.

The Death of Google?

[Gilatrout]

AOL is like the kiss of death. Time Warner found this out the hard way. About the only thing going for it is it's IM tool and that is not enough of a reason to buy this.

The death of Google will not come entirely because of somehting like AOL, but rather from a lack of direction. To me it seems as if Google is going 10,000 directions at once and eventually this will cause it to fracture. They got a bucket of cash from the IPO and it seems like they can't find a way to get rid of it fast enough.

Soon enough that bucket will be empty and then Google is going to have a huge basket of toys that they won't know what to do with because the only thing they have in common with one another is that they are owned by Google.

Re:The Death of Google?

[LnxAddct]

AOL is actually the kid everyone wants to be friends with again. They've revamped alot of their business and are expected to have a strong come back. I know it sounds impossible, but thats what Wall Street is saying, and Wall Street doesn't just put its money anywhere.
Regards,
Steve

Re:The Death of Google?

[BewireNomali]

wall street also likes to run up stocks because large wall street partners are deeply invested in companies. Companies like Legg Mason manipulate the market, usually because they have the most to gain. For example, a Legg Mason guy on Bloomberg television said recently, when asked about how he could justify Google's stock price given earnings, he said something to the effect of, "it's their culture. they have guys analyzing the food they eat." The journalist responds, "well, how does this translate into revenue?" and this guy responds, "imagine if that precision is applied to products." What? What does that mean?

Then a google search shows that Legg Mason owns like 15% of google, actually one of the largest pieces of the pie. They've been in since day one.

The point of which is to say, Wall Street will put its money in places where market psychology will assure quick returns. Satellite radio is an example. Howard Stern even admitted that his signing was the equivalent of a stock run-up, as convergence would quickly kill satellite radio. The audience fed into it by buying a couple of subscriptions; and the car deal was the cincher... a few people are going to get very rich before satellite radio fails.

Google benefits from good market psychology. Apple benefits from good market psychology.

AOL used to have this psychology, but they slept on innovation and got left behind. So the street walked away, and subscribers started bailing.

Then something happened; subscriber base loss stabilized a bit. AIM is the instant messenger analog to google; a free service that has the lion's share of the marketplace.

It's common for kids in general to be more technically savvy than their parents, but the parents tend to make internet decisions in the household. Internet=AOL is easy for the technophobe parent to understand, and because it isn't broken, there is no need to fix it. This hooks the KIDS in the household onto AIM. I've seen this happen - I help my nephew with his math homework on AIM all the time because his mom equates the internet with AOL, despite the fact that they have comcast broadband at home. There is also the perception that AOL is the easiest way to get your kids online. So the subscriber number for AOL can be misleading, because they have like five or seven screennames per subscriber account. And AOL parental controls gives you a very accurate understanding of your audience demographic, a significant percentage of whom are pre-brainwashed emerging impulse consumers. The American economy is artificially propped up by impulse and trend consuming, so these kids mean a lot to the economy. Hollywood alone lives on summer blockbusters, which depends almost completely on the 13-21 year old crowd. That's why you rarely see an R rated film before the fall.

So ironically, investing in AOL is one of those paradoxically sound investments. A dying company with a largely ignorant critical mass user base waiting to be told what to do. It's not a quarterly return investment, so it's not sound for the guy up the block or the cash-out investor. If you're a company who wants eyeballs and an association with what Americans perceive the internet to be, then it's a good move that should yield cash down the line as you get those eyeballs where you want them. Fiscally, they have diversified revenue stream that is relatively consistent.

The other side is that you have to pick this up even if you don't want to, because it leverages considerable revenue power to whomever does.

I'm surprised that Microsoft hasn't barked down this tree before. It would have been a cheaper purchase a couple of years ago.

Re:The Death of Google?

[apparently]

and Wall Street doesn't just put its money anywhere

Welcome, Time Traveler! You appear to have drifted from the dark ages of 1999, to the refined age of TWO-THOUSAND-AND-FIVE! Let me show you around, but watch your step at the door, there's some form of unknown bubble residue decaying in the streets beyond.

Advanced CD distribution system?

[CaptDeuce]

Clearly Google's interest in AOL is their huge CD distribution system, widely regarded as the most advanced in the world as demonstrated by my mailbox.

What's so advanced about a room of 10,000 monkeys trained to stuff CDs into shipping packages? :-j

CD/RW

[MarcoPon]

Clearly Google is planning to use AOL CD delivery system to create the most widespread, giant, distribuited backup system! Maybe you'll even get a scrambled portion of your Gmail e-mails in the mailbox!

Edging into AIM?

[DoddyUK]

Perhaps they're realising that Google Talk didn't do all that well, so they're staking a claim in AIM? Can't see any reason other than that, AIM is the only thing AOL has to offer which is even remotely useful.

Fixing the spelling...?

[MaestroSartori]

Maybe they just want to remedy their original mistake, and now get back to being GoogOL! *badum TISH!*

Duck if you're in Redmond...

[bennomatic]

...there's going to be a whole lot more thrown chairs.

When your own valuation is equally stupid...

[Shivetya]

it is best to put it to use before someone catches on. If AOL was the most over valued presence on the internet in their heyday I think Google is the same for ours.

Yeah Google is doing cool things, moving quicker than their competitors, but they are horribly overvalued. The best thing for them to do is buy up as much IP & resources as possible to form the basis of an enduring and broad based company.

Actual revenue stream?

[Darth_brooks]

I'm sure the fanboys will rush in with the "flamebait" mods, but....

Could google simply be looking at purchasing a consistent revenue stream? I mean, how does google make money? Where is its steady source of revenue? There's adwords and......umm....the five people that actually bought google earth pro? They're not really selling much of anything. It's nice that they're being altruistic, but if I'm an investor, I'd like to see them actually make some money

AOL, if purchased cheap enough, is a cash cow. Scamming a customer base out 22 bucks a month for dial-up and "content" has to be able to earn you a profit once you go all hack 'n slash on the layers of fat that have built up around the company. There's some decent infrastructure there, and a recognizable brand name. It ain't worth 5 billion dollars, but it's worth something.

Any deal for AOL probably includes whatever's left of Netscape, maybe there's something there worth having, too.

closed captioning for the humor impaired

[syrinx]

Seeing as several people have already posted saying "But why would Google want AOL's CD distribution system?" I think it's clear that Slashdot needs to invest in a Closed Captioning for the Humor Impaired system. Those who have tragically been humor impaired would then be able to read the story as:

Clearly Google's interest in AOL is their huge CD distribution system, widely regarded as the most advanced in the world as demonstrated by my mailbox. (THIS IS A JOKE)

and this would cut down on the unneeded posts expressing disbelief, as well as the replies to those posts mocking them. Please do not mock these people; they have a disability. I think a Closed Captioning for the Humor Impaired system would restore a bit of dignity to those disabled individuals.