Microsoft Senior Vice President Yusuf Mehdi, in charge of Microsoft’s Bing and MSN businesses, visited Tim Armstrong in New York this week.
What did they talk about?
Here’s our guess:
PROBABLE TOPIC 1: AOL Replacing Google Search With Bing
AOL’s search and advertising deal with Google runs through December 19, 2010. Microsoft is presumably already pitching AOL to use Bing after that deal lapses.
If AOL were to extend their deal with Google, the new terms would likely be negotiated far in advance. So it makes sense that Microsoft could be pitching Bing now as a Google replacement.
Whichever company wins AOL’s (declining) search business, by the way, will likely be the one that offers the best ad rates. It would not be surprising to see Microsoft put up serious money to win that deal. (Especially now that Google no longer owns its stake in AOL.)
The Google relationship generated $678 million in revenue for AOL in 2008, $642 million in 2007, and $573 million in 2006, according to a SEC filing. So we’re still talking real money.
PROBABLE TOPIC 2: AOL should explore buying Microsoft’s MSN and display-ad businesses.
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.
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