AOL Buys Userplane to Extend Its Hold Onto Chat World

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Will Los Angeles software firm Userplane.com be able to make a clean landing on the Internet aircraft carrier better known as America Online Inc.?


As AOL reconfigures with its shift from a subscription-driven to advertising-based business model, the company has made a move it hopes will increase the network’s efficiency with its acquisition last week of Userplane.com.


“We provide more-or-less ‘white label’ services for large and small online communities that use an IM (instant messaging) and chat platform,” said Mike Jones, chief executive for Userplane.com.


Neither company would disclose terms, but an insider described the price as “in the tens of millions of dollars.”


The company provides services for such networks and sites as JDate, American Singles, Honda, Black Entertainment Television, Internet Gaming Network, Dogster.com and the international Asian site SinoFriends.com, as well as the ubiquitous MySpace.com.


“AOL is the grandfather of chat and IM,” Jones said. “They are going through changes that provide a lot of opportunities for our team.”


Vice Chairman and President of AOL Audience Business Ted Leonsis said that Userplane “would expand and extend the reach and relevance of the AOL instant messaging franchise, while continuing to provide social networking audiences and specialized communities with brand-able clients tailored to meet their needs.”


Userplane.com has 12 employees in its Wilshire Boulevard offices, but they may grow in the coming months and are planning a move to Santa Monica.


“We need more space,” Jones said. “For us, it was important to be successful and maintain a somewhat different position from AOL’s corporate activities. We are growing really fast and we need the impetus for our company to remain.”


Jones said AOL indicated that it would not impose its massive corporate structure on the small startup.


“They told me: ‘You’re not going to need to be immersed inside AOL’s superstructure,'” Jones said.


Advertising initiatives will be the primary focus in the short term. AOL’s AIM and ICQ services have 83 million users worldwide, and is the largest instant-messaging network in the United States. Many people using Userplane’s software range from 18 to 35 years old, a favorite demographic among advertisers, AOL said.


“They’re looking at teams that are building an ad-based business,” Jones said. “AOL has huge amounts of Web assets. We are a big, ad-based business. It’s going to a transition. For me as an entrepreneur, it’s exciting.”


Userplane.com delivers roughly 1 billion ads per month, which include banners, text, video and other forms of Internet advertising.

“In addition, while they’re doing the transition to Web-based business model and advertising space, they are also interested in community space,” Jones said. “When you start to bring those three pieces together, it starts really looking good.”



Out of the blue


Jones said that a good portion of Userspace’s mandate would include developing a presence for the site.


“It’s about letting communities have a relationship with our users when they’re not logged on to our Web site,” Jones said.

The deal came about out of the blue, Jones maintains, when AOL chief Jon Miller contacted Jones through an email, naturally about a possible merger.


“We hit a point where we needed to bring some cash internally,” Jones said. “We had some venture capital interest that we actually trusted. We were about to close this VC deal when AOL approached us. It ended up being something that was really interesting.”


Following two months of due diligence, the deal was solidified.


Jones said that Userplane.com would continue to focus on providing communication tools, but the business plan will remain the same: to build the network through the sub-communities that they already have as well as continuing as an infrastructure provider.


“AOL brought the capital to the table, to let our business grow,” Jones said.



Streamlining AOL


The Userplane deal was part of a flurry of deals cut by AOL this week, which also acquired video game publisher GameDaily and advertising and streaming media specialist Lighningcast.


There is still some uncertainty regarding AOL’s overall direction, but the acquisitions show that AOL still has some muscle and competitive drive, JupiterResearch Senior Analyst David Card told TechNewsWorld.


“One of the things it shows, I think, is there’s still life in the old dog,” Card said. “I’m not one to say AOL’s totally dead. They’re not.”


Once the world’s biggest Internet service provider, AOL has been hampered by larger acquisitions and mergers in the past, most notably its takeover of Netscape and the Time-Warner mega merger.


AOL’s latest steps seem to be more tempered, as the company acquires technology and content players that are “small and digestible,” according to Card.

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