Google, Comcast seek a stake in AOL portal

/ Source: The Associated Press

Comcast Corp., the country’s largest cable TV company, is teaming up with Internet search leader Google Inc. in talks about taking a stake in Time Warner Inc.’s AOL Web portal, a person familiar with the discussions said.

Comcast, Google and Time Warner are discussing a possible deal under which the three companies would form a new entity through which they would jointly own the Web portal, according to the person, who asked not to be identified because release of the information was not authorized.

The potential deal could derail separate talks that have been reported between AOL and Microsoft Corp., which is believed to be interested in an alliance between AOL and Microsoft’s MSN, another major Internet portal. (MSNBC is a Microsoft-NBC joint venture.)

Any deal between AOL and MSN could threaten Google, since AOL is major contributor to Google’s thriving Internet ad business, accounting for 11 percent of Google’s $2.6 billion in revenue during the first half of this year.

AOL was long considered a drag on Time Warner due to the rapid exodus of its core dial-up Internet users, but recently AOL has been revamping its business model, opening up its content to all Internet users in order to tap into the booming market for Internet advertising.

AOL’s original online content now makes it an attractive target for companies like Google and Comcast, which are eager to build up their audiences of Internet users.

The three companies plan to leverage their content and consumer reach to create a Web portal powerhouse, the person said. Google, which is based in Mountain View, Calif., is the nation’s most popular search engine, while Comcast and Time Warner are the top two cable operators. Time Warner also owns many media properties including Warner Bros., CNN and HBO.

Google contacted Comcast last week to gauge the cable giant’s interest in such a deal, the person said. Philadelphia-based Comcast had been on the prowl for content to avoid the commoditization of its cable lines.

Reports of the talks among Google, Time Warner and Comcast sent Time Warner’s stock up 10 cents to close at $17.59 Thursday on the New York Stock Exchange.

Time Warner’s CEO Dick Parsons said recently that revving up AOL’s turnaround is a top priority for the company and the greatest opportunity for creating value. Activist investor Carl Icahn, meanwhile, has been pressuring the company to boost its share buyback program and spin off its cable TV unit.

No price for any deal has yet been discussed, as the talks remain at an early stage, the person said. Reports Thursday in The Wall Street Journal and The New York Times said the deal would focus on AOL’s Web portal business, not on its still-profitable but declining dial-up Internet access business.

Google has been seeking a closer relationship with cable operators because of their close ties with content programmers.

Asked about the talks, a Google spokesman said: “Google and AOL have a healthy global partnership, and AOL remains a valued partner. Your inquiry is about rumored conversations and we’re not able to respond to questions of this type.”

An AOL spokeswoman declined to comment. AOL was the fifth most-popular Web brand in September, according to Nielsen/NetRatings, while Google came in fourth.