Time Warner to spin off AOL

Update at 6:54 a.m. PDT: Added Time Warner's stock movement for Thursday morning, along with background on the history of AOL and Time Warner.

Media giant Time Warner announced Thursday morning that it will cast off its AOL division to become a standalone company.

Before that separation can take place, Time Warner will buy the 5 percent of AOL owned by Google so that it will have 100 percent control of AOL. Time Warner expects the transaction with Google to take place in the third quarter and the final AOL spinoff around the end of the year.

As an independent, publicly traded company, AOL will focus on growing its Web brands and services, as well as its advertising business, according to Time Warner.

Time Warner CEO Jeff Bewkes said in a statement:

We believe that a separation will be the best outcome for both Time Warner and AOL. The separation will be another critical step in the reshaping of Time Warner that we started at the beginning of last year, enabling us to focus to an even greater degree on our core content businesses. The separation will also provide both companies with greater operational and strategic flexibility. We believe AOL will then have a better opportunity to achieve its full potential as a leading independent Internet company.

The separation of AOL from Time Warner will put a final nail in the coffin of one of the emblematic mergers of the dot-com boom and bust. Brimming with the abundant funds and hyper-optimism of the Web's go-go years, AOL--then known as America Online--acquired Time Warner in January 2001 to create the world's largest media company. Within a year, however, it was already apparent that the union of new and old media was not as "supercharged" as its backers had promised.

By September 2003, things had gone so poorly with the merger, and specifically with AOL's dwindling dominance as an online portal, that AOL Time Warner dropped "AOL" from its name, and became just Time Warner.

In subsequent years, AOL has continued to struggle. Consumers have dropped their dial-up subscriptions in droves as broadband access became more widely available and they became more comfortable navigating the Internet on their own.

The first quarter of 2009, like other quarters before it, showed just how much of a burden AOL had become on Time Warner. For that three-month period, AOL's revenue dropped 23 percent from the year-earlier quarter, and Time Warner CEO Jeff Bewkes emphasized at the time that the company was seeking "the right ownership structure for AOL."

In March, several weeks ahead of that earnings announcement, Time Warner appointed a new chief executive for AOL, Tim Armstrong, calling him "the right executive to move AOL into the next phase of its evolution." Armstrong had previously been a leader of Google's advertising sales operations.

Time Warner shares began trading up slightly Thursday morning following the AOL news, starting the day at $23.34 after closing Wednesday at $23.

[superman227]

AOL going full circle, yippy. They hope to regain the millions upon millions of paying customers they had 10 years ago when they were independent. It'll never happen. Virtually everyone out there has either DSL, cable, or Fios. Dialup has no place in the market. Supplemental internet services (MSN/ AOL/ Yahoo Plus/ Netzero) are dead. Even those without much means who have a pc will go for DSL if they can't afford cable.

[kewlfocus1]

Superman, you have no idea what you are talking about. AOL hasn't been subscriber based for a few years. This isn't the same AOL that does dial-up you nimrod. AOL is a content company now.

[TheReaperD]

For a content company they seem to be missing a minor detail... content. Everything they post is either a rehash from other sites or a cheap knock off of other companies.

[jture]

Believe it or not, there are still people on dial-up, particularly in rural areas where broadband infrastructure doesn't exist yet. But those folks aren't using AOL, either.

[birasingh]

When Time Warner and AOL merged about 8 years ago. Everyone said that the CEOs were brilliant minds and go big fat bonuses for it. AOL is a dog of a company and in 5-10 will be in the same position as GM today.

[BigGuns149]

Due to the pace of change on the internet in the last 10 years I think that AOL could face bankruptcy court in 5 years. That being said they still have a *large* number of people who still use their AOL mail accounts after all these years.

[xcal78]

It's funny that AOL bought Time Warner originally as the bigger company but as the trends in internet providers shifts Time Warner has become the bigger company. I think it was a smart move back then to buy Time Warner and is a smart move now to ditch AOL and let it die.

[rmva]

The end of a glorious hoax. God bless investment bankers.

[Randall Lind]

They been saying for 3 years they were spinning of AOL. I will believe it when it happens.

[ddhboy]

Dead man walking.

[BtmnHatesRbn]

Another year, the same announcement. It's been more than just three years. AOL's spin-off was announced, and you can go research it in the Internet Archive, in 2001, just after 9/11 when Time Warner started chasing out Ted Turner, Steve Case, and everybody else that was there before the merger.

[myles taylor]

RIP AOL. It's interesting when you watch movies like You Got Mail and you see how universal AOL was to the world back then. It was almost synonymous with being online. Makes me wonder about Google in a decade or so. Of course, Google isn't sitting on their hands/resting on their laurels like AOL did, so I doubt it will be the same. I remember in 2003 when AOL started hemorrhaging customers.

[BigGuns149]

AOL had enough name recognition that they easily could have evolved with the times, but they pretty much rested on their laurels.

Google I think has a much better future than AOL ever did. Google has increasingly came to dominate online advertising in both text ads and in rich media ads since the DoubleClick acquisition. The claims that Microsoft was going to slaughter them with integration of desktop search in Vista turned out to be a huge exaggeration.

[johnb300m]

the only saving grace AOL has is it's AIM chat service and it's millions of users.
If AOL faulters, it'll be a bit of a pain to re-sign up with Yahoo/MSN whoever for a new chat client. But, just a matter of shifting times...

[BigGuns149]

Increasingly Facebook I think has taken the place of AIM for a lot of people. It definitely is still a nice property that they own, but I don't think it will stop the company from having to shrink in size to stay profitable.

[Voice_Of_Logic]

That piece of crap system is still running? Someone PLEASE kill it and put it out of its misery. And myles, "and you see how universal AOL was to the world" are you kidding me? Everyone I know steered clear of that horrendous system. Please.

[lilmissstarlyte]

As stated above, AOL has evolved to be based on more than dial-up.

Mapquest, TMZ, Bebo.. All AOL properties. And AOL has the broadest advertising reach (91%) of any company on the internet.

This is a great opportunity for the company, and Tim Armstrong will move them in the right direction.

[cp256]

Good riddance AOHELL! It has been a pox upon the internet since the day it linked. I look forward to the fast approaching day of its demise.

[monkeyfun14]

"We believe AOL will then have a better opportunity to achieve its full potential as a leading independent Internet company. "

Leading what? The only subscriber base they have is for AOL and that's only idiotic teenagers who haven't tried something better like Messenger

[monkeyfun14]

AIM*

[NoTimeForFools]

How many paying subscribers does Google have? None. Does that mean they've failed? Yahoo? None. Are they complete failures? AOL is not a subscriber-based company any longer. Haven't been for a long time, in fact. And what's with the "idiotic teenagers" comment??? That makes no sense at all when you consider that younger demographic is all about Google and newer social site. If anything, younger kids are among the anti-AOL crowd. And what could you possibly mean by saying that "AOL [is for people] who haven't tried something better like Messenger"? Do you know that AOL is a complete network of content and service sites, advertising, and social nbetworking and that messenger is an instant message service provided by Microsoft through MSN? Maybe you meant to compare AOL's AIM to Messenger...? Or maybe you don't know what the hell you're talking about...? I think the latter.

[rareskills]

Finally...AOL is going nowhere. Who uses AOL anyways -- are they seriously trying to cater to dial-up users b/c anyone who has broadband is not going to need their overly bubbly gui. They need to slim down and expand the sh*t out of aim chat. Aim chat is one of the best products on the market and they pretty much put it in the dumpster. Where else can you find such a large consumer base and have the capabilities of cam chatting that it did -- nowhere...and what does AOL do...they take away in chat cam features...seriously????

[NoTimeForFools]

What rock did you guys crawl out from under? Your comments (yours and many of the other commenters above) only prove that you don't know what AOL is now. You people comment like you know the topic, but when you refer to subscribers and GUIs, you're talking ancient history. Dial-up? Sure AOL still has subscribers... why would they boot paying customers just because dial-up is all but dead? But dial-up hasn't been AOLs biz model for quite awhile. It's all about the content and that content is free now. Not only is it free, but it wins awards left and right.

[rareskills]

What awards?? AOLs 'biz model' is online advertising (how else would it make money) and guess what...it can't even do that right -- crawl under from YOUR rock and check the facts...in 08 online ad revenue grew 11 percent, guess what AOL was at --- it dropped 6%...wow. I never said they need to 'boot' dial up customers, they just need to slim what they are doing, maybe only cater to them, and as i said before, expand on something they got going for them such as aim chat (or did till the new ver came out a month ago).

[NoTimeForFools]

@TheReaprD...

Huh?! AOL'
s content is rehashed and ripped off? You honestly don't know what you're talking about. I'm not exactly an AOL fan, but I've come to grudgingly accept what most people know... that AOL's content is pretty dynamic, fresh, user-centric, and innovative. Too bad the rest of the company has failed innovate similarly. But that's irrelevant to your comment. Look, if you'e going to be a hater, at least be an educated hater, not a dumb bandwagon critic.

[arlington911]

I was wandering will Aol still offer their host of free services that they currently offer to broadband customers after the spin off from time warner

[arlington911]

I was wandering will Aol still offer their host of free services that they currently offer to broadband customers after the spin off from time warner