AOL's Obvious Shift (Keep Going, Jeff!)
Yesterday, newly minted Time Warner CEO Jeff Bewkes (pictured here) finally acknowledged the Web equivalent of the grass is green and the sky is blue related to its AOL unit.
His move–separating the dying Internet-access business from its much more robust online ad business–was long in coming, and it has been perplexing as to why it took so long for the media giant to declare this publicly.
The bold tone is certainly nice to hear at Time Warner, which has been cautious in the Web game over the past few years, ever since it got snookered in the mega-deal merger to AOL at the peak of the last Internet bubble.
Once burned, twice shy, one might say. But, in the case of the AOL-Time Warner merger, it was scorched earth for the company and the recovery has been long and painful.
Since then, the AOL unit has chugged along slowly, with its parts glommed together in an increasingly uncomfortable way, a vestige of an era when AOL ruled the soup-to-nuts online services business. It was once a very lucrative arrangement, with fat monthly fees rolling in, along with an ad business based on 1999 bubble economics.
No longer, as the way people access the Web was separated from a now largely disintermediated Internet.
Thus, the logical move has been to split the parts apart, giving Time Warner and Bewkes more options, including selling off either or both.
That issue is sure to come into sharp relief with Microsoft’s recent $44.6 billion bid to buy Yahoo, which most are saying is a dire problem for Time Warner, given they both were the prime candidates to buy AOL’s assets.
Well, maybe, but maybe not.
AOL still has one of the stronger ad networks out there, because of its prescient purchase of Advertising.com in mid-2004 for about $435 million. While there are way too many ad networks out there now, it is still an under-leveraged asset within the company, which could be sold, but does not need to be. After all, Time Warner is in the ad business overall and owning an online network is not such a stretch for it.
Plus, it will now be freed from the yoke of the access business, which will eventually decline to almost nothing. But that does not mean zero and its millions of customers might be worth something to someone. In any case, Time Warner can milk that part of the business–as it has been doing–until it eventually falls over dead.
The most interesting part of Bewkes’s figuring will have to center around its content and portal property, as well several interesting Web efforts.
While it is not known for original content, for example, AOL’s recently redone finance page is really quite excellent and useful, giving a dominant site like Yahoo Finance a credible competitor.
In addition, AOL owns pieces of the also terrific TMZ.com celebrity news site, and cool services like its very-early-to-widgets Userplane and the well-done Truveo online video service.
How Time Warner handles these kind of assets, to my mind, will be the most interesting indication of what it intends its digital future to be.
(By the way, Bewkes will be interviewed on stage at our sixth D: All Things Digital conference in late May, so it will be interesting to hear what he has to say then about AOL and Time Warner’s digital strategy.)
