Time Warner dumping AOL

Jake Widman
Friday, 29 May 2009 00:43

Your IT - Home IT

After eight years of a failed marriage, Time Warner has decided that it's time for AOL to hit the road.

It's hard to remember that it was actually AOL that bought Time Warner back in 2001, a deal worth US$147 billion.

The value of the combined company today is put at $27 billion.

At the time, of course, AOL was the dialup online gateway for millions of U.S. customers. But the spread of broadband ate away at that revenue base over the years, though the company still has some 6 million dialup subscribers.

AOL has an advertising platform like Google's and Yahoo's. And it still is number four in online traffic, trailing Google, Yahoo, and Microsoft.

It also still makes money, but its $150 million profit in the first quarter of this year was 47 percent less than the same period last year.

Before spinning out AOL, which will become a separate company run by former Google advertising executive Tim Armstrong, Time Warner will buy back the 5 percent stake Google purchased in 2005.

That investment cost Google $1 billion, but in January Google stated that the value had decreased more than 70 percent. That estimate reduces AOL's market value from $20 billion in 2005 to $5.5 billion today.