AOL Time Warner Split, Leaves AOL Behind

Dec 11 09

AOL Time Warner Split, Leaves AOL Behind

Paul Weinstein

First published: 10th of December 2009 for Technorati

In 2000 with a staggering market capitalization, AOL purchased Time Warner for $164 billion, with an eye towards delivering Time Warner’s unique content to the AOL masses.

AOL Market Value Chart
AOL Market Value Chart by Jay Yarow at The Business Insider

Today most agree that idea never had a chance of becoming reality. AOL is now on its own and after its first full day of independence, Wall Street has let it be known that it views AOL’s chances of redemption as slim. AOL stock is down (-0.34%) while Time Warner stock is up (+4.18%).

AOL’s idea wasn’t half bad. In fact for companies such as Yahoo, the idea itself worked fairly well: build partnerships with content and service providers in order to bridge the gap between users and publishers and make money in the process.

AOL’s business model was always about being a destination for digital content. In its dial-up days, AOL was a rich online community that focused on user-generated content in its message boards and chat rooms. Looking to move beyond user-generated content, AOL set its sights on Time Warner and their rich library of print, music,and video content.

It was that monetization that AOL misfired on. Where Yahoo and Google make money on content with advertising, AOL looked to make money with subscriber fees, only to watch as users abandoned AOL’s notoriously unreliable dial-up service for cheaper, more dependable service providers with access to all content on the Internet, not just the Time Warner content prominently featured on AOL.

Now consider, since AOL purchased Time Warner, Google has come to dominate aggregating and indexing media. YouTube (also part of Google these days) and Hulu have leadership roles in video. iTunes is the king of Pop with a eye on video (with iPod/iPhone and Apple TV) as well as “print” (rumored tablet). Add in up-and-coming Facebook and Twitter have redefined areas AOL once lead: chat, messaging and sharing of content with friends. It is little wonder AOL’s prospects look dim.

Yet while AOL may have lost the #1 spot to Google and is losing momentum to Facebook, AOL can still quickly regroup. Wall Street might be looking down on AOL, but current CEO and former Google executive Tim Armstrong still has a sizable market capitalization north of $2 billion to work with. Plus, AOL is still a top internet destination in the US.

AOL still has a shot or two from behind the eight-ball to make.