Make way for AOL

May 28, 2009

Today marks the beginning of the end of what is probably one of the most disastrous media mergers in recent corporate history — AOL and Time Warner. In 2000, AOL shelled out nearly $150 billion for Time Warner, but things didn’t quite work out as planned.

The folks at Time Warner have given ample hints that a separation from AOL was inevitable, especially as part of a strategy shift that will (hopefully) result on the media conglomerate returning to its core business. Hiring former Google executive Tim Armstrong to head AOL had created even more speculation that the split was coming soon.

Now that the spin-off has happened, what lies in store for AOL as an independent company? In January, AOL said it will focus on three areas: content, advertising and social networking. But things haven’t exactly been rosy at AOL, revenue-wise. So for the time being, it gets to hold on to the access line business, which loses value day by day as more people move to broadband, but still generates enough cash to make it an asset worth coveting.

AOL could also decide that Bebo, the social networking site it overpaid acquired for $850 million last year, is not justifying its price tag and decide to sell it off — although the company has been adamant that Bebo is integral to AOL’s transformation. Potentially, the cash it earns from the access business and whatever it gets from a potential Bebo sale could help AOL — both time-wise and money-wise — figure out its next step, especially because the advertising market shows no signs of coming back any time soon.

As for what that next step might be, we don’t have a clue, but figuring out how to make money off web content could be a start, most likely through smart deals. Maybe with some help from the “frenemy?”

Keep an eye on:

  • Verizon Wireless will begin selling Palm Pre and Blackberry Storm. So no iPhone? (Reuters)
  • Lions Gate Entertainments sells a 49 percent stake in TV Guide. (Reuters)
  • MySpace to be MTV of Internet in India. (Business Standard)

Photo: Lightning strikes the AOL/Time Warner building in New York/Reuters

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