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AOL and MSN discuss search and ad link-up

AOL and MSN discuss search and ad link-up

Internet groups AOL and MSN, owned by Time Warner and Microsoft respectively, have had talks on co-operation in their search and advertising network businesses, say people involved in the discussions.

The talks come against a backdrop of rapid change at AOL following its relaunch as a free portal aimed at building audience share and increasing advertising.

Time Warner shares rose 3.24 per cent to $18.50 on Thursday following reports in The New York Post that the group was in advanced discussions to sell a stake in AOL to Microsoft.

People familiar with the situation indicated that the talks had not advanced to anywhere near this level, although Microsoft could “become an investor in AOL” at some point. Time Warner and AOL declined to comment.

Safa Rashtchy, internet analyst at PiperJaffray, said “both of these are weak portals” that relied heavily for their audience on e-mail and instant messaging.

Closer ties or even a full-blown merger between MSN and AOL would do little to solve their problems, the analyst said, since they would still need to support both brands. “They need better distribution and stronger positioning.”

While both are still losing dial-up customers and struggling to shift to broadband, Yahoo has sealed broadband distribution deals with telecoms and cable companies in the US, UK and Canada.

For Microsoft, a joint venture or minority investment to secure closer ties with AOL would echo the deals it pursued as a way to break into the internet in the 1990s, and which it has now largely turned its back on.

There is speculation it has been looking to dismantle a joint venture with NBC, while losses of more than $10bn from investments in broadband companies prompted Microsoft to say it would no longer look to such deals to extend its influence.

However, a combination would bring together two of the leading instant messaging services, AIM and MSN Messenger, at a time when the messaging market is developing quickly and expanding into new areas like voice over internet telephony, or VoIP.

AOL, despite its strong internet presence, has not pushed up the value of Time Warner shares at a time that internet valuations generally have shot up. Similarly, MSN does not add much value to Microsoft shares.

“Senior management at both companies are considering whether they could create more value from their internet properties by working together,” said a person familiar with the talks.


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