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Revving up the AOL spinoff rumors again

The [old chestnut](/bus-news/article.php/3727181) about Time Warner spinning off AOL got some new life this morning, courtesy of *The Wall Street Journal*. Time Warner reports its earnings on Wednesday, and the company is then expected to inform us that they have finished all of the internal legwork required to separate the content and advertising business from the dwindling dial-up Internet service division.

Once that process is complete, bankers will be able to apply real numbers to gauge each part's value. Then what happens? Well, fire up the rumor mill!

People "familiar with the situation" [told](http://online.wsj.com/article/SB121779084359008083.html?mod=hpp_us_whats_news) the *Journal* that informal talks are taking place with both Microsoft and Yahoo about selling off the content division.

We've been talking about those scenarios since a few short days after Feb. 1, when Microsoft made its offer to buy Yahoo. Back when Microsoft was breathing down Yahoo's neck, Yahoo buying AOL and Time Warner taking a minority equity stake (I was told about 20 percent) was one of the more reliable rumors. We knew talks were happening, but we didn't know how serious they were. And clearly no deal came to pass.

For Microsoft's part, AOL seemed a logical backup plan in case Yahoo got away. Which it did, at least for now. An AOL acquisition would doubtless give Microsoft a shot in the arm when it comes to building out its portfolio of Web content. AOL has oodles of verticals that do pretty well and the AIM instant messaging client would certainly be a nifty pickup.

But the gem of AOL's business would be Platform A, the centerpiece of which is Advertising.com. The latest comScore ranking identifies Platform A as the leading online ad network, reaching 90 percent of the online U.S. population. Yahoo is ranked No. 2, with an audience reach of 83 percent.

So that would deliver Microsoft a rather dramatic bump in its display advertising activities, but that really doesn't get at the reason it was interested in Yahoo in the first place. Buying Yahoo, Steve Ballmer has reminded us, wasn't a strategy unto itself -- it was a "tactic." Microsoft's real strategy, Ballmer [proclaimed](/bus-news/article.php/3761186/Microsoft+to+Keep+Spending+Big+on+Search.htm) at its annual meeting with financial analysts, is to improve its position in search, which he called a trillion-dollar market. With fewer than 5 percent of all search queries, AOL doesn't really move the needle there.

It fits, then, that the *Journal's* anonymous sources suggest that the talks with Yahoo are further along than with Microsoft. It's a better fit, although Time Warner might not have engendered much good will with the recent word that it won't let Jonathan Miller take a place on Yahoo's board, owing to a non-compete agreement. Then again, given that Miller was widely seen as a potential successor to Jerry Yang, the incumbent Yahoos might be just as happy to leave him on the outside. Things would be more colorful with Mark Cuban around, anyway.

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