He told investors that TW plans to split AOL’s access business from its growing online advertising segment. That’s the strategy that TW followed in Europe. [AOL acquired buy.at, an online affiliate marketing network, on Feb. 5 to beef up its advertising business.]The challenge for Bewkes: Who wants any part of AOL’s subscription business, an entity that is pulling off one of Corporate America’s greatest disappearing acts?
According to TW’s financials, AOL suffered a 33 percent decline in `07 revenues to $5.2B due to a whopping 52 percent decrease ($3B) in subscription sales.
Subscription revenues nosedived due to the divestiture of AOL’s Internet access business in the U.K., France and Germany plus the realization among Americans that they can get AOL’s e-mail, software and other products free as long as they have a hook-up to the `Net. Why would anyone subscribe?
In its glory days, AOL boasted a subscription base in the 25M range. It had 9.3M subscribers at the end of last year. That’s down 740K from the earlier quarter and off 3.8M from the end of `06.
Bewkes faces pressure to move quickly because there may not be much of AOL left due to its impressive rate of decline.
Wall Street cheered the AOL spin-off plan. TW’s beaten up stock “surged” more than three percent to $15.88 on the news, still well off the $21.97 52-week high.
Google owns a five percent stake in AOL. Bewkes may save himself the headache connected with the complicated split-up process by wooing the Google guys as white knights for AOL.
The acquisition price of AOL would be a pittance for Google, and far, far below the $45B that Microsoft is prepared to spend for Yahoo!