It's not surprising that Time Warner's (NYSE:TWX) AOL is still buffing up its online offerings. Its most recent purchase is a Web-based chat and instant-messaging concern called Userplane.
Although Userplane, which was founded in 2001, only employs 12 people, it has managed to get some high-profile clients, including News Corp.'s (NYSE:NWS) MySpace, Honda, and Marvel Entertainment.
The obvious benefit of the acquisition is that Userplane lets social-networking, blog, and niche communities easily deploy text, voice, and video chat capabilities on their sites. Userplane offers its product for a fee (based on usage) or for free with advertising.
AOL's price for the company has not been disclosed; the deal was signed July 28 and closed last week. In its press release, AOL revealed that this is the third acquisition it has made this year, after acquiring Truveo and Lightningcast. Many Internet giants have been on an acquisitive kick lately, snapping up small purveyors of hot, innovative, community-based Web products. Last year, Yahoo! (NASDAQ:YHOO) was on a similar kick, as illustrated by its acquisitions of companies like Flickr and Del.icio.us.
AOL's got a lot of work ahead of it, now that it has decided to offer so many of its services free of charge. Instant messaging has always been one of its strongest offerings (and free, to boot) -- if you consider all its IM products, AOL claims to support 83 million users. But it's also got hefty competition from the likes of Yahoo!, Microsoft (NASDAQ:MSFT), and Google (NASDAQ:GOOG), all of which offer free chat programs. I recently explored some of the challenges facing AOL's chat program AIM; its rivals may be gaining ground in instant messaging, where AIM has long been the leader.
So it's not exactly a surprise that AOL is acquiring Userplane, since community-based connections are all the rage right now. And it certainly doesn't hurt to have exposure to the MySpace crowd, which might be the most interesting element of this deal. (After all, consider the amount Google is shelling out to offer search to MySpace denizens.)
Of course, Time Warner investors must surely wonder how much AOL is paying for a small company in a hot space, especially with so many other Internet companies also playing the innovation-through-acquisition game. Hopefully, the strategy will end up being worth AOL's while.
For more on AOL, see the following Foolish articles:
- AOL recently stumbled into a privacy blunder.
- Now, AOL is free as a bird.
- AOL, talk of the town.
Time Warner and Marvel Entertainment are Motley Fool Stock Advisor recommendations. Microsoft is a Motley Fool Inside Value recommendation.
Alyce Lomax does not own shares of any of the companies mentioned.
