The more I think about this, the more I believe that these two deals are linked, intentionally or not. In my last post about Yahoo and MSFT interoperating around IM, I suggested this is a reaction to Google Talk. Kind readers jumped all over me. You were right to do so, as I did not explain myself very clearly. What I really should have said is, it’s a reaction to the potential for Google to interoperate its IM client (Google Talk) with, oh, say, AOL’s (AIM). It’s a battle in a larger war for AOL, and for overall market share.
If you stare at how the battle lines might be drawn up here, the Google/AOL partnership discussions demonstrate that Google is actually starting to play poker in a calculated, strategic fashion, much as its peers in the media world have been for years. Google is at the table now, and like everyone else, it’s eyeing the flop….and the flop, folks, is AOL.
IM and VOIP are critical applications to all players at this table, right? If Google struck a deal with AOL, they could defend their fledgling toehold in IM, and extend it to one of the largest installed bases in the world.
What else is critical to Google right now? Access to traffic of good intent (ie, search traffic and good content traffic). AOL has both, and could help Google defend currently owned search turf, as well as grow its share of this critical revenue/profit driver.
What else? Google must find new users to whom it can distribute the all important Google Toolbar/Sidebar/Destop Search et al – Google knows it has to get into deeper relationships with its users to prosper. AOL has shitloads of users, and were a deal to go down, it’d be pretty straightforward to turn all of ‘em into Google clients.
Comcast, from what I can tell, wants to convert AOL users to Comcast broadband customers. Makes sense. Comcast doesn’t play where Google does, so a partnership might work. And while it might be a stretch for Comcast, the company does not have an open distribution network of any significance, and AOL just might make sense should Roberts & Co decide they need to diversify away from its two businesses of pure broadband provisioning and closed cable networks, which is threatened by TV over IP, among other things.
When I interviewed Jonathan MIller on stage last week he said he knew he was a “swing vote” in the portal wars. There is clearly a war going on right now between Google and Microsoft for the prize of AOL, and Yahoo and Comcast are playing in so far as they can cause trouble, and perhaps, swoop in at the last minute and steal the bride itself.
This is a new game for Google, which has in the past pretty much set itself apart from the rough and tumble world of Big Bets Based on Business Strategy. My gut reaction to the news was that this was a bad idea – Google does not have the Media Player DNA, and in its core believes it should win through innovation, not dealmaking. This next stage of the company’s life should be very interesting to watch. My gut tells me that in the end, Google will get cold feet, mainly because the price (of either a deal or an acquisition) will be too dear, and AOL will fall to Microsoft, who will be willing to overpay. But watch Yahoo here, and Comcast – either one might decide to up the ante and change the game as well.