Yahoo Inc. is considering buying a stake in America Online Inc., joining other Internet powerhouses interested in the company’s Web portal. However, unlike its smaller rival, antitrust regulators would likely review such a deal more carefully, as it would combine the two largest properties on the Web today.
The discussions were described as preliminary and not as advanced as separate talks AOL parent Time Warner Inc. has had with Microsoft Corp. and Google Inc., which is considering a joint bid with Comcast Corp.
News Corp. has also expressed interest, but those discussions have largely ended, said the person, who spoke on condition of anonymity because the release of information was not authorized.
AOL’s talks with Microsoft have been ongoing since late spring, while the other suitors emerged after word of them leaked in mid-September, the person said. Time Warner is insisting on a controlling stake in any deal, the person said.
The Yahoo-AOL discussions were first reported by TheStreet.com.
The Street.com and the Wall Street Journal reported on their Web sites that Yahoo was in talks about a bid for a piece of AOL, which has suddenly become a hot property for its parent company, Time Warner Inc. Research, after years of criticism from investors and users alike. In its report, citing people familiar with the situation, the Journal said the talks between Yahoo and AOL were at an early stage.
Despite the attention, however, AOL has not ever put a for sale sign on any part of its service. Time Warner CEO Richard Parsons also claims the driver for the company ‘is going to be AOL in the short term and the long term,’ and would increase investment in the service.
Nonetheless, AOL has not specifically denied that it would be willing to part with a portion of its business, leading to speculation that the company may accept a deal if the terms — and price — are right.
Officials from Yahoo, Time Warner and AOL declined to comment.
The interest in AOL comes as the company transforms itself from a declining business focused on providing dial-up access to a free content provider able to tap the recent boom in online advertising.
Late last year, AOL abandoned its longtime strategy of exclusivity and began making its rich offerings – including concerts, news, sports and e-mail – available through AOL.com for free, a model Yahoo drove to become the Web’s top brand.
The Web portal side of AOL’s business is worth about $11.3 billion, based largely on AOL’s advertising potential, media analyst Michael Nathanson at Sanford C. Bernstein estimated in a research note.
According to Nielsen/NetRatings, Yahoo had 99.3 million visitors in September, a figure that would have grown to 120 million with the AOL properties. AOL trails Yahoo as well as MSN and Google with 72.5 million.
Rob Enderle, an industry analyst, said Yahoo’s interest in AOL appears defensive. It is more of a block, he said. They are less interested in getting it themselves. They are more interested in crippling Google.
Google would have most to gain from a stake in AOL.
It would give the Internet search leader a way to build a portal – and grow its advertising potential – while preserving an existing relationship with AOL responsible for more than 10 percent of Google’s revenues.
Comcast, if it joins the deal, would get entertainment content from AOL and opportunities to lure AOL subscribers looking to drop their dial-up connections for high-speed services like Comcast’s.
Besides blocking Google’s ambitions, Microsoft could create synergies from an AOL deal, Enderle said. Microsoft’s MSN online division and AOL share many businesses, including an online portal, instant messaging services and dial-up access.
A deal between AOL and Yahoo would probably be eyed closely by antitrust regulators, the report added, noting that a linkup would combine the two biggest Web properties measured by audience of such size.
Whether New York-based Time Warner, the world’s largest media company, decides to sell a piece of AOL remains to be seen.