Wednesday, September 29, 2010

Breaking News: AOL to buy TechCrunch...

That's right. Shocking news indeed. And when I heard it, I too had the same shocked reaction that you have right now: "OMG! AOL is still in business?!?!?!"

When this news blip hit my RSS reader, it was definitely a productivity killer for me. I had to stop what I was doing and find out what AOL does in the age of broadband to make money? I mean, they're not a broadband provider (that I know of) and like most Americans, the only recollection I have of this company is the incessant CD's in the mail with software that would dial-up to the internet -- a utility that ceased being useful a decade ago.

So, on my quest to uncover just how AOL makes money these days -- enough money, in fact, to buy one of the most popular technology blogs on the web -- where did I turn? To Google of course. It would take me about 30 minutes of research to finally discover the irony in that.

AOL, it would seem, suffers from a great brand confusion which is, oddly enough, also it's saving grace. The confusion is that many people still equate AOL with one of two services: dial-up internet, complete with a suite of services that accompanied the dial-up connection; or, their famous AIM (AOL Instant Messenger) which dominated dorm rooms for much of the past decade. And, as the onslaught of broadband has killed the former, the latter is slowly losing ground to social media platforms which offer the same capability and more. So, how has such a legacy saved AOL?

Today, my best estimation is that AOL's revenue streams lean primarily on advertising to the users of their many free services, and to the readers of their many content channels (enter: TechCrunch acquisition). The revenue from paid subscriptions to their services certainly exists, but the acquisition of TechCrunch signals a strategic direction for AOL.

But how has their early-days legacy of THE dial-up provider set the stage for their success today? Simple. They were providing internet services before internet services existed. Before Google, when 30 million Americans connected to the Internet each day via the AOL software on their computer, AOL was the search engine. And, AOL was the go-to email option. Today, many of those same customers remain AOL users.

But if that was the pattern historically, then why has Time Warner, one of the largest TCom companies in the world, released ownership of AOL as of last year? Aren't today's broadband services going to go the way of AOL someday?

Answer: just the opposite. Yahoo was one of the first to move the opposite direction. Yahoo, which began as an internet portal offering search, mail,and content once partnered with SBC to provide broadband. And, most recently, Google has begun to indicate their desire to toe-dip in the broadband market. It would seem that AOL's pattern of moving from ISP to search and content provider may be a step backwards in evolution.

Did AOL miss the boat by not entering the broadband market? Or, did Time Warner hop the boat with their ticket?

Labels: AOL, Broadband, Google, TechCrunch, Time Warner, Yahoo