News

Microsoft and AOL eye joint venture

September 15, 2005

Microsoft is considering taking a stake in Time Warner's AOL unit, a move that could have significant repercussions in the competitive market of consumer Internet content and services, according to reports published Thursday.

Microsoft (Profiles, Products and Articles) and Time Warner are actively discussing such a deal, reports say, although the stage of the negotiations and the nature of a subsequent partnership are being characterized in conflicting ways by different media outlets.

Although AOL once ruled consumer online services with its subscription-based model, it has been scrambling this year to revamp its business and make it advertising driven, by providing for free most of the services and content it previously charged for.

By doing this, AOL, which has been steadily losing subscribers over the past two years, is trying to reinvent itself and better compete with Yahoo Inc., which charges for some services, but whose revenue is generated primarily from online advertising.

Google Inc., which makes most of its money from online advertising tied to its search engine services, has over the past 18 months been adding non search services to its menu of offerings, such as web mail, blogging and instant messaging, and in this way has become a direct competitor to AOL, Yahoo and MSN .

Were MSN and AOL to merge, both groups would bolster each other in a variety of areas. For example, MSN has a strong strategy for broadband content, while AOL has the most popular instant messaging service. Likewise, MSN has a strong blogging/social networking offering with its Spaces service, while AOL has many communities of users around specific interests and services.

Source: IDG News Service