Thursday, October 13, 2005

Everyone Wants to Take AOL to the Dance

Earlier today, it was reported that Time Warner is in talks with Google and Comcast. The suggestion was that Google and Comcast would buy a stake in Time Warner's America Online (AOL).

This would be a very interesting partnership with each of the three bringing a lot to the table. CNET News describes it this way: "The combination would marry Time Warner's trove of programming and Google's popular search and e-mail services with Comcast's high-speed Internet portal and experience in cable video distribution and telecommunications."

The thing is--though--that, less than a week ago, the Wall Street Journal reported that Time Warner was resuming talks with Microsoft (MSN) about linking AOL with MSN. The two giants had tried to come to agreement previously without success.

So, what's the deal? Why's everyone so interested in taking AOL to the dance?

First of all, it's important to realize that the bulk of Google's revenue comes from its advertising program. And, according to the Associated Press, "AOL accounted for 11% of Google's $2.6 billion in revenue during the first half of this year."

Do ya think an AOL/MSN alliance might threaten Google's income stream? Apparently Google thought so because they contacted Comcast to suggest the joint venture with AOL.

Maybe Google was afraid that, this time around, Microsoft would be able to seal the deal with AOL.

We've been talking over the last few weeks about the different cultures of Microsoft and Google. Remember: Microsoft is a proprietary (closed source) company that benefits from the fact that the vast majority of PCs are using its Windows platform. Google is an open source company that believes that the web itself can serve as the platform of the future--a very ugly prospect if you're MSN. (And, if you don't understand what open and closed source mean, go back and read my blogs of October 5 and 6)

Kevin Werbach, a professor at Wharton, had an interesting take on the situation. He said, "At some level, any successful Internet and software company is a threat to Microsoft. Microsoft is in a uniquely dominant position in the computing ecosystem. Anything that attracts a significant amount of use or activity is potentially a threat to them. Microsoft is a threat to, in some ways, virtually everyone in the industry and likewise everyone is a threat to Microsoft."

So, here we are. Both Microsoft and Google have come a'courtin' AOL with Comcast as Google's wingman. Stay tuned for updates.

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