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AOL - The Greased Pig of Search is About to Get Caught
By Jim Hedger (c) 2005 , StepForth News Editor, StepForth Placement Inc.
The greased pig of the search world is about to get caught.
Apparently the pig is a prized ham after all.
For the past three months, AOL has been acting like the greased
pig of the search engine world. Each of the other major players
has been trying to capture a piece of AOL but according to the
breathless reporting in publications such as the Wall St.
Journal, Search Engine Watch, CNet News and WebProNews, AOL has
been playing each against the other. It is much easier to
understand the motivation of the four-legged greased pigs than
it is to figure out the game of negotiated brinksmanship AOL is
playing. In the traditional country fair version of the game,
the greased pigs do not wish to be caught. When such sport takes
place in a boardroom owned by the greased pig however, it is
somewhat reasonable for participants to assume said greased pig
actually wishes to be caught. In the case of AOL's game of
greased pig, appearances have often been deceiving and
experiences will change during actual game play. Nevertheless,
the greased pig is about to be caught and when it does, a series
of events will eventually affect nearly 80% of US Internet
users.
Of all the major search entities, AOL has one of the longest,
most interesting and convoluted stories. It still has one of the
biggest membership bases of any entity on the Internet with an
estimated 97 million. It is owned and operated by the board of
the Time Warner publishing empire. AOL purchased Time Warner in
early 2000 in a legendary stock transfer that took place weeks
before the dot-com crash removed much of the value of those
shares.
The major search engines wanted AOL outright but eventually
found it wasn't for sale as an entity. In late October and early
November, reports surfaced
(http://business.guardian.co.uk/story/0,3604,1636281,00.html )
suggesting Yahoo, Microsoft and Google were each trying to buy
AOL away from Time Warner. Observers might have thought
themselves safe in assuming the Time Warner board might approve
the outright sale of the AOL arm, which has been a drag on
overall operations since the firms merged in 2000. In September
2003, the company officially known as AOL Time Warner moved to
distance itself from its underperforming partner by dropping the
name AOL from its corporate identity.
At the time of the transfer, AOL was the largest Internet
Service Provider in the United States but a series of mistakes,
combined with the sudden downturn in the Internet economy pushed
AOL to near obscurity in the eyes of Time Warner and most
long-term Internet users. Remember the days when AOL sent
hundreds of millions of unsolicited free AOL CDs to homes around
the world promising a month of FREE AOL access. Many, if not
most, of those CDs ended up as drink coasters, Christmas tree
ornaments, unpredictable Frisbees, or, home fashioned ninja
throwing stars.
Like many of the geniuses that coded before them, some of most
important contributions AOL's Netscape team has made to the
Internet can never be balanced in a profit and loss ledger.
Before it bought Time Warner, AOL purchased the beleaguered
Netscape web browser but ended up alienating loyal Netscape
users by redesigning the browser in its own image in the
disastrous Netscape 6.0 release in November 2000. While the 6.0
version was a resounding flop, it stands out as the first major
public open-source application and is considered the predecessor
of the massively popular Firefox ( http://www.mozilla.com/firefox/)
browser. One of the least appreciated assets owned by AOL was
the group of open-source programmers who developed Netscape and
moved on to form the independent Mozilla Foundation
(http://www.mozilla.org/).
Again, like many of those that coded before them, the power of
AOL's reach was grievously underappreciated because the
conditions to exercise that power had not been realized. America
had not gone broadband as quickly as expected and the massive
migration towards digital convergence has until this year been
treated as a dot-bomb pipe dream by mainstream corporate
investors. Now that over 75% of US Internet users are accessing
via big-pipes, video and audio content (stuff folks will pay
for) is now easily served. In short, investors see a way to
easily and inexpensively get products to consumers. As anyone
with a sense of history will tell ya, those who invest in
transportation of goods or people tend to make a heck of a lot
of money.
Sensing the major shifts taking place in today's publishing
sector, billionaire corporate raider Carl Ichan who currently
controls 2.8% of Time Warner's shares has set his sights on Time
Warner chief Richard Parsons. He wants Parsons out and is
expected to be planning the break-up of the empire if he can
mount a successful hostile challenge against the Board of
Directors. The pending shareholders fight might be the biggest
reason Time Warner's board seems to have backed down from
selling AOL or even allowing another firm to purchase a stake in
it, even after months of negotiations with MSN, Google and
Yahoo. The Board was acting like a greased pig, not in reaction
to the competitive bids from the Big3 but in reaction to the
competitive challenge Ichan is mounting against Parsons. AOL is
simply worth too much in the near future to sell off or
compromise today, even if it would have provided a massive
return for investors.
Earlier this month, Ichan warned the Time Warner board he would
hold them personally responsible if AOL was sold at too low a
price. Shortly thereafter, AOL changed its tune and took itself
off the open market, later saying that it would not even sell a
stake in the company.
At the end of the day however, all greased pigs must be caught
and AOL, no matter how wily is no exception. The Wall Street
Journal reported today that AOL and Microsoft are about to sign
a deal that will remove Google from AOL's search page in
mid-2006 and replace it with MSN generated results and paid
advertising.
AOL and Google have been partners in search since 2002 when
Google provided the vast majority of search results seen on
almost every search engine, including rival Yahoo. Under the
present arrangement, AOL retains approximately 80% of ad revenue
generated by AdWords advertising displayed across the AOL
network. That agreement, set to expire in mid-2006, was good for
about $300 million in revenues for AOL last year.
A deal between AOL and MSN will give the two firms access to
over 140 million subscribed members, making it the largest
online content and advertising alliance in the world. Yahoo has
approximately 122 million registered users per month and Google
has about 86 million. Though discussions about selling a stake
in AOL are no longer on the table, chairperson Richard Parsons
applied a bit more grease as he told a Tuesday news conference
that AOL remained in talks with "multiple parties".
That reminds me of something my grand-pappy used to say. "Never
fight with a pig Jim, never fight with a pig." To this day I
have no idea what he meant, but the expression is stuck in my
head. Perhaps he simply had the family trait of foresight as he
died years before the public even considered personal computers.
You see; AOL's Board of Directors might have actually initiated
the greased pig contest as a front in another fight they are
facing with Ichan while, at the same time, playing Google,
Microsoft and Yahoo off against each other in order to force a
stronger settlement from one or more of them. Pigs are said to
be one of the brightest four legged animals and, at the end of
the day, this one has behaved beyond expectations and provided a
captive audience with the greatest greased pig catching contest
of all time. Yee Haw.
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Jim Hedger is a writer, speaker and search engine marketing
expert based in Victoria BC. Jim writes and edits full-time for
StepForth and is also an editor for the Internet Search Engine
Database. He has worked as an SEO for over 5 years and welcomes
the opportunity to share his experience through interviews,
articles and speaking engagements. He can be reached at
"jimhedger@stepforth.com"
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