Rumors of MSN and AOL partnerships
By Charlene Li
The rumors are flying about MSN buying AOL, sparked by a story this morning in the New York Post (registration required) and fanned by WSJ.com. I think the WSJ has got the scenario correct, that these discussions stem primarily from AOL’s interesting in using MSN’s algorithmic and paid search platforms. AOL currently uses Google and the company has been forthright in discussions with me that they will partner for search technology, rather than build their own. I think this is a very smart strategy, as it allows AOL to strike the best technological AND business deal in an ever changing marketing. So at a minimum, we might see AOL switching over to MSN for search technology and ads.
During these discussions, it’s inevitable that MSN and AOL also discussed other ways they can cooperate, especially the idea of combining advertising sales forces on the branding side. As the #3 and #4 portals behind Yahoo and Google, they will need all the fire power that they can muster.
So in theory, it makes a lot of sense to combine the two operations, especially on the back end. But merging the two actual portal consumer experiences into a unified site will be a nightmare. Cooperative ad sales can happen through partnerships and a full out acquisition would be difficult for MSN to absorb. Moreover, while both serve a more mainstream customer than Yahoo and Google, they have very different experiences. AOL provides a more content-driven experience, given its Time Warner and programming heritage. MSN is more utilitarian in its approach, focused on utilities and references. Consumers would rebel at any effort to combine the two together. It would, however, make sense for the two to share content, services, and best practices, injecting AOL’s programming expertise into MSN and MSN’s technical expertise like anti-spyware and virus protection into AOL.
There are pressures for Time Warner to spin off AOL, but an outright purchase by MSN seems unlikely to me, especially during a time when online advertising is just hitting its stride again. But if there was to be a purchase of AOL by any of the three portals, MSN would make a great deal more sense than either Yahoo or Google.