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Monday, August 14, 2006

AOL Acquiring Userplane; Further Attempts to Monetize AIM

Stock Tickers: TWX, GOOG, NWS

Time Warner's (TWX) AOL LLC today announced that is has acquired Userplane (userplane.com) of Los Angeles, CA. Userplane operates in community networking software and it develops and markets easy-to-use, Web-based chat and instant messaging tools for rapid deployment and seemless integration into many web services.

The press release said the agreement with AOL was signed on July 28th and closed last week. Financial terms of the deal were not disclosed.

According to the company, here is their blurb:
Userplane - originally founded in 2001 by Michael Jones, Nate Thelen and Javier Hall - has licensed its chat technology to more than 100,000 Web sites and online communities, and has a presence in more than 25 countries. Key customers include MySpace.com, Honda, Date.com, Spark, IGN, Tagged, Red Bull, Marvel Comics, and others. Userplane's wide network of online communities includes social networking and dating websites, blogs, and niche communities.

What is very interesting here is that it is tools that could have (and may be) in the Google area, and it is impossible NOT to notice that NewsCorp's (NWS) Myspace.com is listed as a customer. Google (GOOG) just recently received the Myspace.com search contract from NewsCorp, and that was announced in between the initial Userplane deal date and now. So is that going to continue, or will it end? If it ends, did that get factored into the price? Since financial terms were not disclosed, it is hard to quantify.

Userplane offers its Web-based chat and instant messaging services under three business models. There is a monthly licensing model in which customers pay fees based on usage, a free model in which Userplane represents the resulting advertising inventory, and a hybrid model through which licensed clients can also place Userplane's advertising inventory on their site and share in the proceeds.

This really looks like the ultimate goal will to be an expanded use of the AOL Instant Messaging service. The street has said that AOL has greatly missed on revenues for the service. Almost all of Wall Street and many other rapid mission critical businesses use the free AOL instant messengers to actually conduct business, so perhaps this is the first of many initiatives the company will take to further monetize the franchise after it is essentially migrating the rest of AOL over to a free service.

Userplane and its 12 employees will continue to be based in the Los Angeles, CA area. It will operate as a wholly-owned subsidiary of AOL. According to this release Userplane is AOL's third announced acquisition of 2006, following Lightningcast, Inc. in May and Truveo, Inc. in January. Other recent corporate acquisitions by AOL include Music Now, LLC, Weblogs, Inc., Xdrive, Inc. and Wildseed, Ltd. - all in 2005.

Jon C. Ogg
August 14, 2006
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