The Marketplace Report: Rivals Make AOL Move
ALEX CHADWICK, host:
Back now with DAY TO DAY. I'm Alex Chadwick.
Several reports out today say that the online search engine Google and the cable giant Comcast are in talks to buy a $5 billion stake in Time Warner's AOL. Any agreement between those three could scuttle Microsoft's advances toward AOL; it also is interested. "Marketplace's" Tess Vigeland joins us from Los Angeles.
Tess, first of all, how much of this is speculation?
TESS VIGELAND reporting:
Pretty much all of it, Alex. There are several reports in The Wall Street Journal, The New York Times, Reuters, AP citing unnamed sources saying that Google and Comcast have teamed up for these talks with Time Warner. Now Time Warner's chairman, Richard Parsons, insisted at a luncheon in Hong Kong today that it's all market rumors. And theses rumors have been around for the last couple of months, ever since Microsoft started talking to Time Warner about buying a stake in AOL. And what they're all looking at is getting a piece of AOL's Web presence, including its portal and its instant-messaging service and, of course, all the eyeballs and advertising that go along with them.
CHADWICK: You know, it's funny because wasn't Time Warner's joining with AOL thought to be one of the disastrous corporate marriages of the last decade?
VIGELAND: Yeah. In fact, Time Warner even removed AOL from its corporate name a couple years ago. But the fact is that the AOL brand name does still have value. Millions of people still use its Web portal every month. And it's gotten a lot of attention for some of the content that it provides, like the Live 8 concerts over the last summer. I spoke with Standard & Poor's Internet stock analyst Scott Kessler, and he says a lot of this interest stems from a shift in strategy at AOL.
Mr. SCOTT KESSLER (Internet Stock Analyst, Standard & Poor's): Historically, AOL has been perceived as a company that's largely driven by its subscription business. Now the company is really focusing on establishing itself as more of a freestanding portal-like entity that generates substantial advertising revenues.
VIGELAND: And, again, it's that part of the AOL business that's generating interest here and not the dial-up Internet access side of it. Nobody's really looking to get a piece of that, given the prevalence of broadband these days.
CHADWICK: Right. OK. Well, two more quick questions: Why would Google team up with Comcast, and what happens to Microsoft in all this?
VIGELAND: Yeah, you'd think Google would have plenty of cash to buy a stake in AOL on its own. But Comcast has been forging lots of ties with the folks who produce programs, TV shows and movies. And Google is always looking for more content for its Web site. So this kind of partnership could be beneficial.
As for Microsoft, apparently its talks with Time Warner were going along swimmingly until last week when Google and Comcast came knocking. They're certainly not out of it yet. But Microsoft's interest in AOL, either part of it or all of it, certainly could have sparked concern at Google because AOL advertises on Google and uses Google's search engine. Microsoft could look to bring that to its MSN portal.
And later today on "Marketplace," we're looking at the latest Hurricane Katrina job losses.
CHADWICK: Thank you, Tess Vigeland of "Marketplace" from American Public Media.
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