Mining the Web
HERE’S A TREND with a familiar ring: Powerhouse Internet firms are eyeing stakes in media companies.
The latest example is the pursuit of Time Warner’s America Online unit by Google, Microsoft and Yahoo. If that reminds you of the dot-com-bubble era, it should.
In January 2000, then-Internet giant America Online used its high-flying stock to buy Time Warner, an “old media” empire with strong brands in television, cable TV, movies, music and publishing. The move sparked speculation about a wave of coming “new media” takeovers fueled by overheated stock prices, but there were no further blockbusters of that sort. Instead, the Internet bubble burst and tech shares plummeted, wiping out the upstarts’ purchasing power.
Unable to digest its massive purchase, AOL became a unit of Time Warner. And its Internet access service has morphed from a market redoubt to a dial-up relic in a world increasingly dominated by high-speed connections. Nevertheless, AOL has something that’s appealing to Google -- and to Microsoft Corp., Yahoo, cable giant Comcast and News Corp.: The content and messaging services it offers online have huge followings, and they’re generating fast-growing advertising revenue.
That’s what makes this go-around different from the last one. As before, deals such as Google’s pursuit of AOL are being driven to a great degree by a hunger for content that can be fed to Web surfers. But in the late 1990s, the audiences never materialized in numbers big enough to generate profits.
Today, companies still hope to draw viewers (and advertisers) away from their TV sets and other “old media” strongholds -- and this time they can make it pencil out. More than half of all Internet users have high-speed connections that are always on. As those consumers spend more time online and less in front of the TV, advertisers are following them to the Web, generating billions in revenue for Google, Yahoo and other hotspots online -- including AOL.
That’s why News Corp. has spent about $1.5 billion buying websites for video-game aficionados and sports fans, as well as a popular site for social networking. And it explains why Viacom, which News Corp. outbid for the video-game sites, bought dot-coms dedicated to films and virtual pets.
AOL’s price tag is steep -- about $20 billion, or $10 billion for the pieces that are drawing the most interest from suitors, sources told The Times. Those values may not match the dot-com-bubble numbers -- the initial value of AOL’s offer for Time Warner was about $160 billion -- but they’re tied to real online revenue, not wishful thinking.
