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AOL, Time Warner Tug-O-War

The Wall Street Journal penned an entertaining piece yesterday entitled AOL's loose cannon: Justin Frankel. Frankel is the twenty-something who cooked up the music company Nullsoft, which America Online acquired last year for $100 million in stock. He's both irreverent and wildly popular amongst the open source community for his many side projects that include most notably, the peer-to-peer music swapping software Gnutella.

Sure he's a headache for AOL. Every time the ISP turns around, Frankel's off working on some other politically incorrect grassroots scheme. And that's where the clash really occurs. He's grassroots, while AOL's all about the corporate culture. However, Frankel's boss is content to look the other direction, because frankly, he'd be a nightmare if he left to strike out on his own. But the WSJ missed the story behind the story. You probably can't see it yet, but it's right there in plain view. Spokespeople for AOL may say otherwise, but here's why the Internet graybeard likely takes Frankel's antics as serious as a heart attack.

Everyone's been closely following the blockbuster merger - err - acquisition of Time Warner by America Online. But do people really understand what the deal means? In two words, pipes and promotion. While AOL enjoys unfettered access to Time Warner's fat pipes, the Internet access giant will simultaneously roll out ambitious plans to push every last one of Time Warner's existing and future media properties, and in turn, those properties will tout AOL. So how come that makes Frankel a boil on AOL's butt? Hold on, I'm getting there.

Remember all those acquisitions AOL has been making in the last couple years? You know, $100 million for Nullsoft, which owns the popular MP3 player WinAmp, $300 million for Israel-based ICQ instant messaging, and of course, the $4 billion land-grab of Netscape. Start weaving these seemingly unrelated acquisitions together, and watch them all begin promoting everything from Time Warner books to movies to music. Now which of the three aforementioned, books, movies, or music, lends itself best to both distribution and promotion over the Internet? If you said music - play it again Sam.

While Napster's been busy fighting the good fight, AOL and Time Warner are quietly finalizing plans to hawk MP3s from artists under the vast umbrella of Time Warner's music labels. I'd say before the end of the year, barring any unforeseen potholes on the road to this mega-merger, it will happen. But two loose cannons need to be muzzled in order for that initiative to be successful. First, Napster needs to go the way of the do-do. And second, AOL needs to put a leash on Justin "music wants to be free" Frankel.

Frankel first stirred the pot when he created the Napster-on-steroids peer-to-peer music swapping software, Gnutella. And his latest stunt was the release of AIMazing v0.4, a plug-in that blocks advertisements on AOL's instant messenger. When the WSJ brought it to AOL's attention, a spokeswoman shrugged it off. But within an hour, the plug-in was yanked off the Web. You can bet that higher-ups at AOL are fuming over Frankel's persistent hijinks for good reason. Whether he knows it or not, he's close to jeopardizing a lucrative new revenue stream for AOL.

But don't count on the ISP to cut the programming aficionado loose anytime soon. As the old saying goes, keep your friends close and your enemies closer. AOL's seen what Frankel can do when he's gainfully employed. There's no telling what a crackerjack programmer like Frankel might do if he takes the kid gloves off. And regardless of