Around two years ago during the reported talks of a Microsoft + Yahoo marriage, another relationship came to surface: that of Microsoft acquiring AOL. Well, history repeats itself, as the acquisition chatter is aflutter again over the same MAOL opportunity.
On the surface, everyone can see a purchase of AOL comes with a boost in search share and a tremendous lift in impressions, both of which would likely put any suitor to the top of the comScore property list. But underneath, there is more that AOL can provide that goes unnoticed. Yahoo sees this additional value through their recent purchase of Associated Content.
Currently, the largest value in content generation lies within natural search result monetization. It is clear from this observer that ownership of the natural search monetization channel is the value that Tim Armstrong sees and is building at AOL. Associated Content (remember, also backed by Armstrong) was probably pitched to Yahoo in the same way that AOL is rumored to being pitched to Microsoft. AOL’s Seed.com will only generate content that will show up on search results that command high CPC bids. Content on mesothelioma, auto insurance, student loan consolidation and other top CPC driving search terms will be created on-demand, not just more manicured thought pieces on politics, news and entertainment (for more in this “impatience media” movement, read the following in yesterday’s New York Times).
Tim can see that Google only owned a small portion of the revenue that was generated from a search, while thousands of other companies made billions from Google’s free results. Vantage Media is but one company that reaped the benefits of this with content generation made specifically for boosting their ad portals into natural search results. They built an entire business model around one keyword pair: online education. Why not expand this model into every vertical? And who better to crack this than a former Googler that knows the natural search results game?
In fact, you’d think that Google would be after AOL as well considering they already own a stake and it’s already being run in the direction they want it to go by their own people. It’s a no brainer, and it seems to give off an eerie scent of an inside job (in as much as Google acquiring Publicis might be considered an inside job too!). The only thing that would throw a wrench in a Google purchase under this premise is the idea that Google would become the fox guarding the “relevant results” henhouse. But what’s the difference? It’s already happening now, Google just doesn’t own it yet.
The value in owning the impressions off of natural search results only increases when true liquid access to advertising on this content combines with real time bidding, exchanges and DSPs; add to this the tremendous behavioral targeting data opportunities with retargeting, and Microsoft or Google can squeeze a lot of blood from this stone. As such, the benefits likely outweigh the monetary cost of what AOL may command, but any buyer must also know the indirect costs (re: some of AOL’s well-publicized problems) and how to handle them. A buyer must know exactly what to do with each portion of AOL before they buy it so that we don’t see history repeat itself yet again with another failed AOL ‘synergy’ merger.
Monday, June 7, 2010
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