During today’s Time Warner earnings call, executives blamed AOL’s lower paid search revenues on lower query volume, lower cost-per-click prices, and on Google’s changes to the search algorithm.
This last bit is telling news.
In September, we learned that Microsoft Senior Vice President Yusuf Mehdi — the guy in charge of Bing and MSN — visited AOL CEO Tim Armstrong at AOL’s New York headquarters.
We don’t know what happened at that meeting, but at the time, we wrote that AOL should explore buying Microsoft’s MSN and display-ad businesses. Even more importantly (and likely), AOL should negotiate with Microsoft to try to get a sweetheart deal using Bing. This could replace much of the revenue the company is currently losing from Google–at least temporarily.
AOL’s media business will be a major focus after it spins off from Time Warner, as it tries to become a Time Inc. for the 21st Century. Microsoft’s online business, meanwhile, has a massive amount of traffic, but has been a money loser for Microsoft forever — incinerating more than $8 billion over 13 years (including search).
Now that Microsoft has decided to focus on search, maybe it’s time for the company to finally just spin off its display businesses. AOL, meanwhile, could benefit from more scale, especially as AOL.com’s old mojo bleeds away. We’ve been saying forever that the big four portals (Google, Yahoo, AOL, and MSN) need to combine into three. Maybe Microsoft and AOL have finally come to the same conclusion.