In yet another instance that shows how the Internet can make bedfellows out of rivals,
America Online (AOL) will be teaming up with its competitor,
Microsoft (MSFT), for new online offerings.
The world's largest online service will start carrying Microsoft's Slate beginning this fall on AOL's revamped newsstand, according to Paige Prill, a spokeswoman for Microsoft.
In addition, AOL will be featured on Internet Explorer 4.0's Active Desktop, a push component that lets a user select channels for automatic delivery of news, information, and entertainment content via the Web browser.
AOL executives today confirmed both reports. The company will have a channel on IE 4.0, called AOL Preview Channel, which will allow anyone using that browser to immediately download content from the online service. AOL Studios and AOL International Services also will develop additional channels of IE 4.
While AOL and the Microsoft Network are highly competitive--even more so today than they were a week ago, before AOL purchased the No. 2 competitor, CompuServe--the move makes good business sense. The companies ultimately have to work together in order to better serve their customers, and they both want to gain new users and promote their services.
Microsoft executives have been trying to get Slate out to the largest possible audience in hopes of making the online magazine so popular that they can one day charge for it. The more people read Slate, the more they can charge for ads.
For its part, AOL is always looking for good content. If people go to AOL to read Slate, then the online giant isn't really going to care who produces it.
If Slate can gain access to at least 9 million more potential readers, it isn't going to turn down the chance, according to Slate publisher Rogers Weed. Slate will be an anchor tenant on AOL's soon-to-be-revamped newsstand, he said. He estimated that right now Slate attracts about 100,000 readers a month.
But for the privilege of reaching millions in one fell swoop, Slate will pay AOL an undisclosed amount of money for a certain number of guaranteed clicks. AOL members will click on the magazine's introductory page on the online service and then go to Slate's Web site.
"AOL is looking for good content to build up their service and to provide value to their subscribers, and we're looking for more distribution," Weed added.
Slate had planned to charge readers subscription fees after an initial period but delayed those plans in January. Weed said that Slate still would like to sell subscriptions, but until it builds up enough of a following, that won't be practical. "We still intend to charge subscriptions at some point."
While Slate undoubtedly will be able to use this deal to generate more advertising revenue, Weed doubted it will bring in enough cash to put Slate in the black.
Several other Internet companies have found themselves in similar straits, forming alliances with their competitors in order to garner advertising revenue.
Yet the agreements between the two online rivals should not be seen as a sign that MSN and AOL are burying the hatchet. Quite the contrary. Now that AOL will gobble up the subscribers of its closest competitor (depending on whether the Justice Department approves the deal), MSN has to fight even harder if it is going to catch up with the market leader.
Last week, Microsoft scarfed up some CompuServe employees, bringing them over to MSN as contractors to run forums. In addition, MSN has been talking for a while about bringing its content from behind the firewall so it will be accessible to members and nonmembers alike. There is even talk that the service could move the heart of its operation--the online forums--out onto the open Internet to expand its audience.
While it does that, AOL will be fighting to keep its content compelling enough to attract new customers while warding off competitors who are chasing the same people.
These days, Internet companies are all going after what is seen as the next wave of online growth: new Net users, who are slow to adapt and want easy, fast, and functional online services.