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AOL Mum on Microsoft Merger

October 10, 2005 — CIO — America Online Inc. Chairman and Chief Executive Officer Jonathan Miller remained mum, in an appearance at the Web 2.0 Conference, when asked to comment on recent rumors that Microsoft Corp. may be talking to AOL about buying it or at least about striking up a partnership with it to boost its MSN Internet division.
"I’ll try to say something but avoid the question," Miller said smiling during a session in which he chatted with conference chair John Battelle and with audience members.
Battelle suggested that Microsoft’s MSN unit might be aggressively seeking to sign AOL up for MSN’s new sponsored search ad network. Miller acknowledged that AOL is a "swing voter" in the market for sponsored search ads, because of its traffic volume. AOL currently serves up Google Inc. ads with its general Web searches, which are also powered by Google.
Miller was more forthcoming on the topic of AOL’s recent abandonment of its traditional walled-garden philosophy of providing most of its content and services to paying subscribers. It is shifting to an open Web portal approach, such as Yahoo Inc.’s, in which most of the offerings are free and the revenue comes from advertising sales. "We’re in that transition. It’s a business model transition," he said.
It was hard to change the company’s mentality, but "that’s done," he said. His goal when he joined AOL in 2002 was to "get the company in sync with the market" and the walled-garden approach had to be ditched in order to accomplish that, he said.
Contrary to what many assume, the decision to switch to an open Web portal approach wasn’t prompted by the steady decrease in subscriptions, he said. As of March 31, 2005, AOL had 21.7 million [m] U.S. subscribers in its fee-based service, down 2.3 million [m] from the same period in 2004 and down 4.5 million [m] from the first quarter of 2003.
Even if the subscriptions instead had been rising to say, 40 million [m] in the U.S. today, that figure would still be unacceptably low and limiting, compared with a potential Web audience of hundreds of millions [m], he said. AOL is one of only a few Internet companies with a big, global brand, a status that is hard to accomplish and which has been attained by a select group that includes Google and Yahoo Inc., he said. "The worst you can do is limit" that type of broad brand, he said.
Miller

 

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