• Suzanne Stevens on Armstrong's vision to rescue a sinking AOL.
• Watch a video clip of The Deal's Mary Kathleen Flynn interview Tim Armstrong on the floor of the NYSE the day AOL went public.
  

The shape of Time Warner Inc. under recently installed CEO Jeff Bewkes gained focus Monday, June 9, with sale implications for AOL's access business signaled as very likely, for AOL's advertising business as somewhat likely and for lagging Time Inc. titles as too tough to call.

While those inside Time Warner Inc. anxiously await what CEO Jeff Bewkes will focus on next, having just shuttered or consolidated three studios in the media conglomerate's filmed-entertainment division, many on the outside believe he'll set his sights on Time Inc. And within this publishing division, Southern Progress Corp. is being tipped as a standalone unit that's ripe for an auction.

STRATEGIC ACQUIRER

Meanwhile, AOL was beefing up its ad and content business.

• The company said April 15 it would acquire Sphere Source Inc., a venture-backed company that makes a search widget used by Web publishers.
  
• The deal followed its March acquisition of social networking site Bebo Inc., its February deal for widget maker Goowy Media Inc. and two deals in November.
  
• AOL said Nov. 12 it had acquired Yedda Inc., which runs a Q&A Web site, for undisclosed terms, just days after unveiling plans to acquire content-targeting online advertising company Quigo Inc. for more than $340 million. Both have R&D operations in Israel.
  
• The ramp-up came as AOL was angling to bolster its online advertising capabilities to offset declines in subscription revenues and better compete with Google and Yahoo! And as GigaOm's Om Malik pointed out, with Yedda, AOL was betting on the startup's ability to give it "traction in the 'answers' game," where Yahoo! has prevailed.

(See more on M&A below.)

The deals came nearly two months after the company unveiled a stronger relationship with Hewlett-Packard Co. and said it would flee its Northern Virginia corporate headquarters for digs in Manhattan, signaling a serious push for its ad network or, as some speculated, that it was bringing the business close to its parent to shape it up and prepare it for a sale.

As its transformation continued through 2007, AOL announced a co-branding deal with HP to offer versions of its portal -- targeted locally -- its toolbar and search functions on the manufacturer's machines. Under the deal, default settings for HP laptops and PCs would include a co-branded homepage, search and toolbar functions.

To focus on its advertising platform, AOL also said it would move its headquarters to New York and integrate several recently acquired companies. AOL's then-latest deal came July 24, with a deal for Tacoda Inc. and its online tracking technology to help target advertising. Terms of the deal were not disclosed, but the news came little more than two months since it last beefed up in the sector.

The company pushed in the mobile advertising direction May 16 with a deal -- which The Wall Street Journal and peHUB's Dan Primack pegged at $80 million and $110 million respectively -- for German ad-serving company Adtech AG. The Adtech news came two months after AOL retreated from its $900 million planned takeover of Swedish online marketer TradeDoubler AB, after extending the deadline for its offer, but still failing to gain 90% of the target's shareholder approval for such a deal. The move would have enabled AOL to boost its online ad presence in Europe, but after extending the deadline, it failed to garner sufficient backing. The moves signaled a hot M&A market for online advertising companies and the push may are making in the mobile ad sector.

Back in 2006, the company said Nov. 8, it planned to acquire Relegence Corp. to add technology for aggregating and delivering real-time Internet, television and other content. The news came about a month after the company retreated from the Internet access business in Europe and amid part of a broader restructuring.

Time Warner announced Oct. 11, 2006 the $464 million sale of its AOL UK Internet access unit to Carphone Warehouse, the final divestiture to retreat from the access business in Europe amid part of a broader restructuring.

The news came weeks after its Sept. 21, $365 million sale of its AOL France business to Neuf Cegetel, which marked its second European divestiture that week. The AOL France news came on the heels of Telecom Italia SpA picking up AOL Germany for $852.7 million, a buyer that had previously expressed interest in taking all of AOL Europe.

The ultimate fate of the once-mighty titan of dial-up Internet may say a lot about the future of a company struggling to shed its dinosaur skin and survive in an ever-changing online world.

• In a September 2006 statement, Time Warner's then-chairman and CEO Dick Parsons called the latest agreement "the second stage of our current initiative to build a more competitive and profitable AOL Europe -- a strategy that we're pursuing in all of our businesses."

And quite a pursuit that was -- launching new products and services, a strong push into Web 2.0, an e-mail campaign to AOL customers with messages from management about changes to expect and walking away from its subscription-based revenue model, providing e-mail services to users free of charge.

• The possibility of AOL going free first surfaced in media reports in July 2006 and came to full light in August. Its strategy called for AOL to continue offering e-mail and instant messaging, but also augment its offerings with a suite of Web 2.0 technologies -- abandoning as much as $2 billion in subscription revenue, The Wall Street Journal said at the time, and turning its back on its traditional business model.
  • The shift came after the company's subscription base began to slide and in response, AOL began to make some of its Internet services offerings free. Alongside AOL's acquisition of Advertising.com Inc., the move bolstered ad revenue growth.
  • Among its suite of Web 2.0 offerings are social networking (AIM Pages), video sharing (UnCut Video), Web log search feature (Weblogs) and an RSS feed aggregator (My.AOL.com).

BELLS AND WHISTLES

Earlier in September 2006, AOL launched a new instant messaging tool aimed at business users seeking tighter security than traditional IM services offer. In March, AOL said it would begin to sell programming on its Web site by the middle of the year, just weeks after announcing alongside competitor Yahoo! that it would offer a service through which companies could choose to charge a small fee to ensure e-mail would reach the intended recipient, an attempt to thwart spam.

Also in September, The Deal's Paul Bonanos pondered the future of AOL and whether Web 2.0 could be its saving grace.

• Bonanos wrote: "AOL could save itself not so much by developing new kinds of online features aimed at early adopters, but by adapting emerging Web 2.0 technologies for mainstream users."

HIGHS AND LOWS

AOL parent Time Warner, has long drawn criticism from dissident shareholder Carl Icahn who has criticized the company for botching its integration strategy for the unit. AOL certainly had much to contend with.

In August 2006, the company's chief technologist resigned after research underlings orchestrated a data breach that made available search histories of more than 650,000 of its users that could potentially reveal their identity.

• The company drew a stern response from Capitol Hill lawmakers who said stricter laws about the kind of information Internet companies collect are in order.

  • But the breach also highlighted the need for data security and startups to tackle it in innovative ways.

Earlier in the month, AOL grabbed community network software company Totekasche Holdings Inc. for undisclosed terms, its third buy of the year. Others included online marketing software maker Lightingcast Inc. in May and video search company Truveo Inc. in January 2006.

• In late June 2006, along with Venezuelan media company Cisneros Group, Time Warner divvied up America Online Latin America Inc. and its three bankrupt affiliates. The Fort Lauderdale, Fla. company was formed as a joint venture in 1998, hit its peak in 2002, but failed to provide service in target markets and saw its customer base drop.
• In April, AOL announced a partnership with China's No. 2 media group, Shanghai Media Group, to provide content for a Chinese language version of AOL, aimed at catering to Chinese speakers in the U.S.