First it was Microsoft Corp., now it’s Google Inc. and Comcast Corp.: It seems everyone wants a piece of America Online Inc. (AOL).
Fresh rumors surfaced on Thursday of negotiations regarding Google and Comcast buying a portion of AOL. These discussions, reported by news organizations including The Wall Street Journal and The New York Times, follow on the heels of previous reports that Microsoft has been working on buying AOL or a portion of the company from Time Warner Inc., AOL’s current owner.
Spokespeople from AOL, Google and Microsoft all declined to comment. Each of the tie-ups makes sense and analysts agree that the loser won’t be left completely in the cold.
The rumors have all the companies interested mainly in AOL’s portal with its valuable content, not its Internet access business.
“AOL has some great content that is broadly appealing to consumers,” said Joe Wilcox, senior analyst with Jupiter Research. “One thing that Microsoft lacks for MSN is a lot of good content.” For Microsoft, owning all or some of AOL means that it can earn more revenue from ad sales and also extend the reach of its search application. Currently, AOL uses Google for searches.
Part of Microsoft’s interest in AOL may also stem from concern over Google’s market momentum. “Microsoft is concerned about Google and the things they might do,” Wilcox said.
There may be more of an upside for Google than Microsoft, said Patrick Mahoney, an analyst with the Yankee Group. “They’ve been dabbling in a portal or home page strategy yet they don’t have really any content assets,” he said. If Google wants into the content market, AOL offers a solid entry.
AOL’s content could also be good for Comcast, which could benefit from additional content as it moves away from solely serving as a pipe to the Internet. Some reports describe a deal where Google and Comcast together make a bid for AOL.
The timing for any of these negotiations makes sense, Wilcox said. “We’ve crossed that threshold where broadband has enough momentum over dial-up,” he said. “What we see is a lot of emphasis now from MSN and AOL on delivering content for those fatter pipes.”
Also, Google is recently flush with cash, putting it in the position to make a significant acquisition or investment.
Both Wilcox and Mahoney were suspicious of the fact that the rumors of both negotiations have been leaked. “It was very convenient for Time Warner management that people are really excited about AOL right now,” Mahoney said.
Time Warner has been pressured by some major investors to sell off AOL. Such leaks about negotiations can drive up a company’s value as additional suitors compete.
Regardless of which of these companies — if any — end up with AOL, the loser won’t be left destitute. “There’s always someplace else to look,” Wilcox said. Mahoney agrees. “It will benefit somebody but I don’t think anyone will be a loser,” he said.
