With Microsoft walking away from the Yahoo deal, there’s been a lot of talk about what it’s next best option would be. Going after AOL is an obvious choice. It has the ad inventory (aka pageviews) Microsoft needs, has its own collection of growing online advertising businesses, and has a very willing seller in parent Time Warner. The Times of London is reporting that Microsoft and AOL are in “preliminary talks” about an acquisition. And AOL isn’t exactly hitting on all cylinders right now, so it could be a much cheaper, cleaner purchase.

http://business.timesonline.co.uk/tol/business/industry_sectors/technology/article3876643.ece

Of course, Microsoft is still talking to everybody at this point, except maybe Yahoo. Whether it truly intends to set its sights on AOL is unclear because it needs to talk to AOL at the very least as a strategic ploy to try to thwart any possible deal between Yahoo and AOL (which has always been a possibility in the background). But at least Wall Street doesn’t seem to think that a deal is imminent. Yahoo’s shares are up 4 percent from yesterday to $25 a share right now, while Time Warner’s shares are pretty much flat at $16 after rising about 6 percent last week. Maybe Yahoo’s talks with Google are going better than Microsoft’s talks with AOL.

(Disclosure: As a former employee of Time Warner, I own some shares in the company)

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A Federal Court found today that AOL, Real Networks and Yahoo owe $100million to songwriters and composers as back payment for streaming music online.

The court ruled on a request from the American Society of Composers, Authors and Publishers to establish reasonable compensation for the playing of their works. Notably ASCAP represents writers and composers and not the record industry, so the request for money is on top of any existing licensing agreements with the RIAA and its constituent members.

The court found that “reasonable license fees” are owing from AOL, RealNetworks, and Yahoo for the music streamed and distributed from their sites, retrospective to 2002, at a cost ASCAP counts at $100 million.

Unsurprisingly, ASCAP was happy with the decision:

“The Court’s finding represents a major step toward proper valuation of the music contributions of songwriters, composers and publishers to these types of online businesses - many of which have built much of their success on the foundation of the creative works of others,” said ASCAP President and Chairman and Academy Award-winning lyricist, Marilyn Bergman. “It is critical that these organizations share a reasonable portion of their sizable revenues with those of us whose content attracts audiences and, ultimately, helps to make their businesses viable. This decision will go a long way toward protecting the ability of songwriters and composers to be compensated fairly as the use of musical works online continues to grow.”

The Digital Media Association, a trade organization representing online streaming and music providers, said that the are not opposed to compensating composers and writers, but object to the model imposed by the court, with demands companies hand over 2.5% in part of all revenue as compensation, not just revenue from the music services themselves.

(in part via CNet)

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AOL may have the widest-reaching advertising network in Platform A, but it is not seeing the financial rewards of that reach. In fact, Time Warner today announced that during the first quarter, AOL’s overall advertising revenues grew just 1 percent. Total revenues at AOL slid 23 percent because the access business continues to go away, but everybody knows that and the focus now is on whether AOL can reinvent itself as a pure Internet advertising company.

AOL spent about $1 billion over the past year on companies like Tacoda and Quigo to buy its ad network market share. Those businesses aren’t quite kicking in yet partly because of delays in integrating their sales forces But the bigger problem was that gains in third-party ads sold on other sites were almost completely offset last quarter by an 18 percent drop in display ads on AOL-owned properties. AOL makes a lot more margin on ads it sells on its own sites than on ads it sells on other sites. That is why it is trying to boost its own pageviews by upgrading its sites and is the reason why it bought Bebo for $850 million earlier this year. The more ad inventory AOL can sell on its own sites, the better its margins will be.

AOL’s deal with Google on paid search advertising, like IAC’s. is also helping to shore up its overall advertising sales. Although, it is not clear what the exact impact was because the company did not break out the numbers.

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This guest post about the widget economy was written by Michael Jones, an angel investor, the CEO of Userplane and a Senior Vice President of AOL.

Mike Jones’ personal blog is here.

Companies facing a slowing economy are looking for more cost-effective ways to reach customers. Forrester’s recent post on the role of social media during economic recessions supports the idea that social media can help companies survive and thrive in tough economic times. And Josh Bernoff’s full report on the subject calls for an end to “toe-dipping” by interactive marketers and advises a more serious look at cost-effective and measurable social marketing programs. A key take away:

…since interactive marketing programs are now fueled by measurable results, not dot-com madness, we believe that they can thrive in a recession. Social applications in particular, such as communities and social networking sites, are cost-effective and have a measurable impact on prospects’ decisions in the consideration stage, which will be important to companies under recessionary pressures. Interactive marketers should stop toe-dipping and invest only in programs that can deliver on measurable metrics.

Additionally, Forrester analyst Jeremiah Owyang points out that social marketing costs far less than traditional marketing. So when purse strings are tightened, marketing execs will become more excited about social media’s potential of reaching exponentially more people with fewer dollars.

While the recession-proofness of social media is a case study in the making, the idea that social applications can thrive in tight economic times because they are a cost-effective, precise way for companies to interact with customers and prospective customers, is right on the money – quite literally.

(more…)

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Tags: widgets

AOL’s programming sites (Money & Finance, News, Sports, Health, Food, Music, Games, and Moviefone, among others) hit an all time high in high in unique visitors and traffic in March, the company says. Page views to the sites are up 35% over the last year and unique visitors up 11% to 56 million (AOL as a whole draws 209 million monthly unique visitors, says Comscore).

As a whole, the properties have had six consecutive months of unique visitor and page view growth.

Why the surge? AOL attributes it to a year long rebranding and redesign effort, noting that every key vertical site has been redesigned (see our coverage of AOL Finance, for example, and the almost immediate traffic surge that followed).

Many of the programming sites have dropped the AOL brand altogether. We wrote recently about the launch of Switched, their technology network. Black Voices, an African American culture and news site, and Assylum, a men-focused site, are other examples.

AIM, MapQuest, AOL Music, AOL Television, Black Voices, TMZ and Asylum are No. 1 in their respective categories, based on unique visitor counts from Comscore. AOL Money & Finance, Real Estate, Moviefone, Women, Health and AOL Latino are all in the top three spots compared to competitors.

Also see news of AOL’s acquisition today of fantasy sports site Fleaflicker, which it is integrating into AOL Sports.

AOL is monetizing all of this content through Platform-A, which recently became the top U.S. advertising network by reach. In March 170,537 U.S. Internet users (91% of the total audience) visited a site represented by Platform-A. Yahoo and Google, by contrast, reached just 85% and 81%, respectively. More on AOL’s advertising plans here.

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AOL has acquired Fleaflicker, a New Jersey-based fantasy sports site founded by 26 year old Ori Schwartz. We first covered in July 2006.

The transaction price isn’t being disclosed. Based on the highly fluctuating traffic to the site and the fact that they only support football (which explains the huge drops in traffic during the off-season), my guess is this is more of a technology acquisition than the buying of the business operations. Fleaflicker also powers the Washington Post’s Fantasy Football leagues.

AOL runs its own very popular fantasy sports sites for football, baseball, racing and golf, and AOL sports is surging in general (more on that in a follow up post).

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Tomorrow AOL will announce the acquisition of San Francisco-based Sphere, a blog content engine that launched in 2006. The price is not being disclosed, but sources are suggesting it’s in the $25 million range, or possibly a little more. More details from Om Malik

When Sphere first launched as a blog search engine they were already late to the blog search game. Technorati and others had been around for some time already, and even Google Blog Search was nearly eight months old. Sphere had some nice features, but it was in a tough and competitive space.

But CEO Tony Conrad, a former venture capitalist, quickly adapted to the changing market and focused on delivering blog results relevant to content delivered by big news and content sites. Time was the first to go live with “Sphere It” links, and most of the big news sites followed over time. In July 2007 we noted that they had very quietly completed a transformation into a “related content” engine.

Sphere lands in Bill Wilson’s organization, the EVP of Programming at AOL. His division controls AOL’s content properties (Entertainment, Finance, Weblogs, etc.). In a phone call today, Wilson told me he doesn’t intend to change Sphere’s approach or brand. They are growing a number of micro/niche brands, he said, and leveraging what he calls “passion points” of small but passionate audiences. Sphere fits right into that by showing relevant content to users, and getting AOL content in front of more users.

Congratulations to Conrad on the aquisition, as well as the rest of the Sphere team (Mike Garfias, Alex Bendig, Andy Cabell, Anne Dorman, Jeff Yolen, Adam Embick, Josh Guttman, Kevin Cowan, Sven Henderson, Troy Vitullo and Michael Harzheim). Sphere had raised $3.5 million in venture capital over two rounds.

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New figures released by comScore show that AOL’s Platform A advertising network is the top advertising network in the United States by reach (unique visitors).

According to the figures, Platform A reaches 90.7% of all American internet users, ahead of Yahoo on 85.3% and Google on 80.9%. AOL’s figures include ads served from Advertising.com.

Erick covered rumors of an AOL advertising lead IPO in September 2007 and more recently AOL was said to be in merger talks with Yahoo. Ultimately these figures don’t equate to revenue, but market leader by reach is certainly a strong selling point for AOL in any merger talks or for an IPO.

comScore also released figures for “niche” advertising networks and the Snap Shots Advertising network, launched in November 2007, came out on top. Another notable entry is Widget Bucks, which launched in October 2007.

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A Yahoo board meeting Friday authorized talks with both Microsoft and Time Warner (AOL) next week.

According to a New York Times report quoting sources, Yahoo’s board met to evaluate Microsoft’s takeover bid and other alternatives but did not make a formal decision on which option to pursue.

The fence sitting from Yahoo provides some solace to Microsoft after a week where an AOL-Yahoo deal was said to be close at hand.

The Times also quoted a “person briefed on the discussions” between News Corp and Microsoft for the former to join the bid for Yahoo as describing the discussions as being only “conceptual..suggesting that a joint bid was unlikely.”

(source img credit: RedBrick Blog)

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What a day. I can’t say neither side is throwing punches any longer in epic fight over what’s left of Yahoo. Microsoft and Yahoo are done, for the most part, with sternly worded letters.

Yesterday Yahoo made two announcements/leaks. First, that they were very close to agreeing to terms that would combine Yahoo and AOL as an alternative to the Microsoft deal. And second, that they will run, ahem, a two week test of Google Adsense on 3% of their Yahoo search results page, instead of their own ads.

Microsoft responded that the Google deal is a precursor to handing over de facto monopoly power of the search advertising space. And they threw their own curve ball as well: News Corp. has switched teams and is now in Microsoft’s camp.

The formal entry of AOL into the discussions suggests Time Warner wants to offload the asset soon. If a Microsoft/Yahoo deal goes though, the only realistic suitor for AOL is Google, and that gives them little negotiating leverage.

The News Corp news is more interesting. In a move reminiscent of the Italians switching sides in World War II, they’ve abandoned their Yahoo soul mate for a more compliant Microsoft. They put in a bid for Yahoo in February (more), which was reportedly countered just a couple of weeks ago. My guess is the counter offer wasn’t very interesting, so they switched sides. You gotta love News Corp., they’re always there when they need you.

But by far the most interesting news is the Yahoo/Google alliance. Industry insiders still question whether regulators would allow the deal, but Yahoo’s been whispering around Silicon Valley that a business partnership with Google, as opposed to a merger, would stand a much higher likelihood of getting approved.

What Is Yahoo’s Strategy - Scorched Earth, Or Knife To The Nose?

Yahoo has put costly severance plans in place to both retain employees and make themselves a less attractive acquisition candidate. But top talent has left anyway, and just about everyone at Yahoo seems to be looking for a job (even execs I’ve spoken with). Meanwhile, the Google deal shows they would rather give up the search marketing game, their biggest asset, than become part of Microsoft.

Their actions, which appear to be based on destroying their market value as a counter to the Microsoft bid, benefit neither their stockholders nor their employees. And by setting up Google as the only real option in search marketing, they are disrupting what little market balance and competition exists in that space today.

I can’t decide if nose knifing or scorched earth is the best way of describing what they’re doing, but I have to ask: If Yahoo “wins” this epic battle with Microsoft, will there be anything left at the end to celebrate over?

It’s time to end this thing before Yahoo ends itself. I don’t care if they throw AOL, MySpace, and half the rest of the Internet into the deal along with Yahoo. But the health of the Internet demands a counter balance to Google. Yahoo-Microsoft, given the current state of things, is the only reasonable outcome.

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