AOL

It's official. Time Warner Inc. will finally spin off AOL LLC on Dec. 9, 2009.

From the landmark merger that brought Time Warner and AOL together (see video) in 2000, the kick-off to The Deal's "Deals that defined an era" cover story in March, it's been a bumpy ride. Read on.

2009

Nov. 19: AOL to employees: Please go away: In a filing Thursday with the Securities and Exchange Commission, AOL said it has informed its workforce that it wants to cut a third, or about 2,500, of employees. The company is asking employees to step up to the chopping block on their own (and presumably receive a buyout package), saying the cuts will be "conducted on a voluntary and involuntary basis." - - Olaf de Senerpont Domis

Nov. 17: Convergence diary: AOL spin: With the Dec. 9 spin off of AOL Inc., Time Warner Inc. (NYSE:TWX) will officially cast a vote against the marriage of content production and content distribution. - Chris Nolter

Nov. 10: AOL is laying off 100 of its 6,000 workers Tuesday, according to tech blogs Valleywag and BoomTown.

Sept. 8: 'Peanut butter manifesto' writer joins AOL: To head up AOL LLC's Internet and mobile communications, CEO Tim Armstrong is tapping Brad Garlinghouse, previously a Yahoo! Inc. (NASDAQ:YHOO) executive best known for authoring a frank critique of his former employer that got leaked to the media.  - Mary Kathleen Flynn

Aug. 28: New AOL CFO has spinoff, deal experience: Mergers and acquisitions, financial planning and internal audit are some of the things Arthur Minson will be handling as the new EVP and chief financial officer of AOL LLC. What's more important to AOL is Minson's past experience with AOL -- he held a corporate development/finance role -- and the hand he had in Time Warner Cable Inc.'s transition to a public company. At TW Cable, he was EVP and deputy CFO. - Baz Hiralal

July 23: Buffett, Stewart to star in AOL cartoons: What do dealmaker Warren Buffett, lifestyle media magnate Martha Stewart, supermodel Gisele Bündchen and late astronomer Carl Sagan have in common? Aside from being the leaders of their respective fields, the four will be featured in their own online cartoons produced by Time Warner Inc.'s (NYSE:TWX) AOL and A Squared Entertainment. - Gerald Magpily

June 11: AOL goes local with dual acquisitions: AOL LLC chief executive Tim Armstrong isn't letting his company's spin off from parent Time Warner Inc. (NYSE:TWX) distract him from doing deals. AOL on Thursday acquired Patch Media Corp and Going Inc. - Suzanne Stevens

June 4: News Corp.'s Miller poaching AOL talent: News Corp.'s (NYSE:NWS) chief digital officer Jonathan Miller continues to stack the MySpace executive team with top talent. The latest hire, according to paidContent.org, is Sam Wick as senior vice president of strategy. Wick previously was VP of strategy and corporate development for AOL LLC's display advertising unit Platform A. You may remember that Miller was famously fired as AOL CEO in November 2006. - Suzanne Stevens  

May 27: Time Warner board may decide AOL's fate: Time Warner.'s board will meet May 28, and there's speculation it will finalize plans to spin off AOL. Time Warner has hinted the separation is coming -- but has offered few details on when or how it will be accomplished. TechCrunch, citing sources close to AOL, is reporting those details will be hammered out at the board meeting. - Suzanne Stevens -

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April 30, 2009: AOL's Armstrong lures former Google colleague: Time Warner's AOL unit has lured another executive away from Google. AOL announced Thursday it has hired Jeff Levick as president of global advertising and strategy.

There's been much speculation about AOL's future. The unit has not performed well for parent Time Warner. First-quarter ad revenue was off 18%, and AOL announced a 10% workforce reduction in January. The option most commonly discussed is a spinout of AOL, which some industry analyst speculated might be fueling the recent management changes. - Suzanne Stevens

April 17: Time Warner closer to AOL spinoff or sale: Proponents of an AOL sale or spinoff got another sign that Time Warner may do just that with the beleaguered Internet unit. Clearing the way for such an event, bondholders approved an amendment for outstanding debt of $12.3 billion. Each bondholder who gave consent will receive $5 for each $1,000 principal amount of debt. - Baz Hiralal

March 13:AOL hires Google's Armstrong as CEO Time Warner shook the head of its AOL unit, replacing chairman and CEO Randy Falco and president and COO Ron Grant with nine-year Google vet Tim Armstrong. - Baz Hiralal

Feb. 23: AOL builds on its social media acquisitions: Time Warner's AOL unit is playing catch-up in social media, using acquisitions to chase Facebook Inc. and News Corp.'s MySpace. According to reports on Cnet and Boomtown, it's making progress. - Kenneth Klee

Feb. 4: Google to TW: Spin off AOL? Buy our stake? Do something!: Time Warner, which reported a $16 billion quarterly loss, has to be frustrated with Internet media company AOL, which reported a 23% drop in quarterly revenue and also announced layoffs. - Baz Hiralal

Jan. 28: AOL cuts jobs, will it cut Bebo?: It was reported that Time Warner's AOL is cutting 10% of its ranks, or about 700 people. AOL CEO Randy Falco provided "some perspective" on that and other cost cutting decisions, while the company tries to grow its publishing, advertising and social media businesses. However, one in-depth report, citing several sources with intimate knowledge, said AOL was thinking about selling social networking site Bebo -- which it acquired last year for $850 million -- for about $200 million as it hasn't met expectations. - Baz Hiralal

Nov. 20, 2008: Yahoo!, AOL continue their two-step: Scott Davison, a former senior vice president with AOL, admits he's out of the loop regarding a potential merger between the Time Warner Inc. Internet unit and Yahoo! Inc., a story that refuses to go away. But he still sees plenty of value in AOL. - David Shabelman

Aug. 15: AOL aggregates Socialthing!: Looking to build on its acquisition in March of social networking site Bebo Inc., AOL has snapped up Socialthing! Inc., a social media aggregation tool that lets users track their online social communities and broadcast updates to them. At least that's what this blog post indicates. It also says the Socialthing! platform, which is currently in beta, is integrated with 13 sites, including such well-known names as Facebook, Twitter, Digg and Flickr. - David Shabelman

Time Warner said Aug. 6 it would split the unit into two separate divisions -- separating its dial-up Internet access business from its content and advertising operations -- which would make it easier to sell the divisions, which continue to drag on the media conglomerate's earnings, Shabelman wrote.

This was not a new plan, but were the dial-up business to go on the block, a possible buyer was EarthLink Inc., which was thought to have held talks with AOL and whose CEO told The Wall Street Journal such a deal was "worth aggressively pursuing." Another is John Malone's Liberty Media Corp., though EarthLink is the more likely of the two, Shabelman argues. Meanwhile, Google Inc. said Aug. 7 it might have to take a charge on the $1 billion it pumped into AOL in 2005. At the time, the deal valued AOL at $20 billion, a figure Time Warner would be "hard-pressed" to come by for the two divisions today, Shabelman argued. The company unveiled some cost-cutting and reorganization measures in late July, also fueling the deal rumor fire.

And over at Yahoo!, former AOL CEO Jon Miller was seen as a likely board addition for the company under fire from activist Carl Icahn, but a noncompete with Time Warner kept him off the board. See Dealwatch: Yahoo! for more on that saga. Meanwhile, rumors persisted that Yahoo! and Microsoft Corp., unable to agree to a transaction of their own (so far), have talked to AOL about a possible deal. Hiralal noted: "The Wall Street Journal reports that discussions with Yahoo! Inc. are more advanced than those with Microsoft Corp., and that analysts value the ad and content business at $3 billion to $4 billion."

A PRIME TIME REWRITE

For Time Warner, a broader restructuring was underway. In early June 2008, The Deal's Richard Morgan wrote:

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.

In early May, Morgan wrote:

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.

The last move was to unhook its cable business. Time Warner said April 30 it would spin off Time Warner Cable Inc. as a separate company, and later gave some more details on its plan to transform through a so-called "digital transition," which centers on its film business and extends to other areas like moving its magazine business online, Morgan explained. The Deal's Chris Nolter in late December 2007 dug into the tall task for Bewkes, ahead of his taking over as CEO for Richard Parsons at the beginning of the year. Again, he analyzed it in April.

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.

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