AOL Tried To Buy Associated Content

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Three months ago, AOL CEO Tim Armstrong entered into talks to buy content farm Associated Content, but Time Warner (TWX) shut him down, a source familiar with the talks tells us.

Why did AOL want Associated Content?

Tim’s turnaround strategy is to transition AOL from an ISP to a next-generation media company. Part of that strategy is, a site where AOL’s editors can assign stories tens of thousands of freelancers.

Problem is, says a source, has no backend right now — “It’s all frontend.”

Associated Content is a platform that could solve that problem.

Why did the deal fall apart?

Money. AOL (TWX) didn’t have enough, and Time Warner wasn’t willing to give Tim enough to get the deal done.

“Tim’s got no money at all to do anything. [AOL] has barely enough to cover payroll. He doesn’t have any money now and he didn’t have any money then,” says a source.

Will the deal ever happen?

It could. AOL may not have tons of cash to spend right now, but its cash reserves could see a nice bounce back if Tim is able to sell off properties like Bebo and ICQ.

Also, AOL is profitable and its ISP business still throws off about $3 billion per year. If Tim can cut costs and save that cash, an Associated Content deal could be back on.

AOL might have lots of competition, though. An industry source tells us just about all “of the old media companies” are at least looking at Associated Content.

How much did AOL want to pay?

Sources who know wouldn’t say, but an industry vet tells us Associated Content’s asking price is above $100 million. At the UBS conference, Tim said AOL would not make any Hail Mary acquisitions (ahem, Bebo, ahem, $850 million). But since Associated Content fits so well with AOL’s media strategy, we wouldn’t put it in that category.

Wait, isn’t Tim Armstrong an Associated Content investor?

Yep. Actually, Tim is an Associated Content founder. He’s also very close to Associated Content CEO Patrick Keane, since the days when they both worked at Google (GOOG) in New York.

But Tim also founded Patch, a network of local blogs AOL acquired in June. When that deal went down, Tim refused all profits from his seed investment, and got his seed capital back in AOL shares after it separated from Time Warner. Probably something like that would have happened again.

What does AOL and Associated Content say about this?

Nothing. An Associated Content rep refused to comment on rumours. We sought comment from AOL, but haven’t heard back yet.

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