November 19, 2003 11:34 AM PST

AOL acquires multimedia search provider

update America Online on Wednesday said that it acquired audio and video search service Singingfish in an effort to improve its own Web search engine.

With the deal, AOL will tap Singingfish technology to let AOL Search users look for audio and video content. The online company also hopes the addition of a multimedia element to its search engine will appeal to broadband users, a population that the company is trying to entice.

Financial terms of the agreement were not disclosed.

The addition of multimedia search dovetails with existing AOL efforts and gives the company opportunities for new search-related advertising revenue. AOL Search has a deal with Google to provide algorithmic and commercial search results.

Google pays AOL a percentage of revenue generated by its paid-search relationships with advertisers, although the companies do not break out the amount. But the more traffic on AOL Search, the greater the potential for revenue to be generated through this deal.

In addition, AOL will benefit from Singingfish's advertising revenue. Singingfish collects fees from entertainment advertisers who pay to be listed in its audio and video search engine. Singingfish also licenses that multimedia search engine to Microsoft's Windows Media Player and RealNetworks' RealOne, digital media players that let Web surfers search for multimedia files.

This source of ad revenue could become more important, as legitimate music services such as Apple Computer's iTunes and RealNetworks' Rhapsody gain popularity, and as the entertainment industry looks to attract consumer attention in places where people search for multimedia files.

Google, for example, has been aggressively courting Hollywood to advertise within its own sponsored search program, even though it does not yet offer multimedia search.

Industry watchers say that the deal plays into AOL's push toward broadband and could help the company take advantage of its parent company Time Warner's library of content.

AOL is targeting broadband users as part of its plan to sell a version of its service customized for high-speed connections. This "bring your own access" (BYOA) plan offers AOL's services such as e-mail and instant messaging, bundled with multimedia content and flashier graphics for $14.95 a month, compared with $23.90 a month for AOL's dial-up service.

"Streaming media is a big attraction when you have broadband because you can get it out and it works," said Chris Sherman, editor of Search Day, an industry newsletter. "Lots of internal content could be distributed this way, and AOL sees it as an opportunity to enhance its service."

Still, the move to BYOA underscores a troubling trend for the company's dial-up business. Over the past year, AOL has reported that roughly 2 million dial-up subscribers have left the service. Many of these members left for broadband services offered by cable and phone companies, while others left for discount dial-up service providers such as NetZero.

AOL last quarter reported that it added 340,000 BYOA members.

AOL's aim to augment search and broadband services parallels that of Microsoft. Industry analysts said that AOL could have snapped up Singingfish as a strategic move to keep it out of Microsoft's hands, as the software giant erects a search system of its own. But unlike Microsoft, AOL does not have an open plan to build or buy search technology that could compete with its partner Google. In this regard, the Singingfish acquisition is an anomaly.

Besides adding audio and video, AOL on Wednesday said it launched local information search as well. The company's "In Your Area" feature lets people search yellow pages listings, movie show times and local city guides.

AOL added that it recently unveiled a news search feature that lets people look for breaking-news articles on various topics.

 

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