If you have an e-mail address ending in @aol.com, Google has put a price on your head. You are worth US$769.23. Unfortunately, you will not be able to use it to pay your credit card bill. That's because Google, best known for running the world's most popular search engine, put that valuation on AOL's 26 million users worldwide on Tuesday by buying a 5 percent stake in the company from Time-Warner for US$1 billion, suggesting an overall price tag of US$20 billion. (By contrast, Yahoo's US$30 million purchase last week of the social tagging site Delicious valued it at about US$100 per user.)
The AOL valuations, however, are a long way down from the US$182 billion merger of AOL and Time-Warner in January 2000. Then, the Internet provider had 20 million users and AOL had a notional value of US$100 billion (being 55 percent of the merged company); that's about US$5,000 per aol.com address.
Although it is a depreciating asset -- AOL had the two biggest names online, Google and Microsoft, circling it -- the final sale was, by all accounts, a knife-edge process in which the firm from Mountain View, California, barely managed to edge out its Redmond, Washington-based rival.
According to a report in the New York Times, AOL executives walked back and forth between conference rooms at the Time-Warner center in New York, each room occupied by teams from Microsoft and from Google.
The reasons for the separation were those of the poker room, of not giving away one's strategy. But there is little love lost between Microsoft and Google. In November last year, a senior Microsoft engineer, Mark Lucovsky, had a meeting with Steve Ballmer, the corporation's chief executive, to reveal he was leaving to join Google. At this, Lucovsky says in court documents, Ballmer launched into an expletive-filled rant at Eric Schmidt, his opposite number at Google, threw a chair across the office, and said: "I'm going to fucking bury that guy. I have done it before, and I will do it again. I'm going to fucking kill Google." (battellemedia.com/archives/001835.php)
Ballmer's reaction, on being challenged on this by journalists subsequently? "I've never thrown a chair in my life."
And the threats to Google? "Did I say I wanted to compete with Google? I don't know what words," he said in September.
In truth, few people who have seen the video of Ballmer leaping on to a stage and screaming "Developers! Developers! Developers!" to an audience of cheering Microsoft developers would have much trouble imagining him becoming very excited if a favored employee was leaving for the rival that, more than any, seems to have evaded Microsoft's attempts to rein it in.
But set Microsoft's reaction aside for a moment.
The news of Google's purchase was first refracted through the lens of bloggers and other online commentators, the people who are Google's daily users. And their reaction could be generally summed up as horror, first, that Google would involve itself in -- no, buy -- part of something as olde worlde as an ISP, especially the reviled (because terminally uncool) AOL; and that as part of the deal, as the description went, "Google will also provide technical assistance so AOL can create Web pages that will appear more prominently in the search results list" and that "Google will offer promotion to AOL in ways it has never done for another company" [according to two unnamed executives close to the deal].
In other words, AOL content gets favored status in Google results.
"Yow. Don't jump the shark, Google," commented John Battelle, author of Search and a keen observer of the battle for dominance online between the top triumvirate of search engines -- Google, Microsoft and Yahoo.
His remark was echoed with yelps around the blogosphere as those who thought that Google was simply a company that offered search, whose engineers decided what it should do, where the chef decided what was on the menu, realized it had done something they could not understand.
Has Google really "jumped the shark?" The phrase originally described TV shows that began running plots or stories far removed from their roots, signalling inevitable decline -- epitomized by the king of biker cool, the Fonz from Happy Days, donning waterskis to jump a shark. Now, it's applied to any organization that is past its best.
And why else would the coolest search engine team up with the most uncool of ISPs, one which had dragged down Time-Warner so far in the past five years that at one point, some analysts thought it had a negative value to the merged group?
But closer examination of the deal shows that Google has not lost its collective senses. Instead, to the company's maxim "Don't be evil" (coined by founders Sergey Brin and Larry Page), chief executive Schmidt has, one could surmise, added the proviso "And don't get beaten into the dust by Microsoft." Put simply, the acquisition of the stake in AOL, a company that is hemorrhaging users and value, was done to prevent Microsoft crushing Google as it did Netscape.
"When it came to crunch time to make a deal, [Schmidt] knew that he had to bring home a Google victory," Alan Meckler of Jupiter Research said. "He knew that Google could not allow a Microsoft-AOL alliance and figured out a way to beat Microsoft."
And the deal was essential to Google's survival because AOL's users are a prime source of its revenue and profits. Google remains the search engine underlying AOL, a partnership that generated US$420 million of advertising revenue for Google in the first nine months of this year, about 10 percent of total income, and its biggest single source of revenue.
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