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

the outcome to this ongoing
tug-o-war, one thing’s for certain – it’s more fun to watch than a barrel
of monkeys.

Any questions or comments, love letters or hate mail? As always, feel
free to forward them to kblack@internet.com.

Want my daily missives delivered with your morning toast and coffee? Sign
up for my DealTracker newsletter.