Cha-Ching! AOL Cashes In (With Yahoo)

AOL made an aggressive move to expand its advertising network by giving Web developers the means to cash in. The AIM Money program, scheduled for launch in April, provides a revenue-sharing platform, tapping the company's Platform-A business to serve up the ads.

The effort to build an ad developer network that shares revenue aims squarely at connecting AOL's advertising services with consumers. The service builds on new and existing relationships with Web developers--and not just at media and advertising agencies, but one-person shops, retail stores and corporations supporting individual Web sites, social networks or blogs.

"The first company that effectively figures out how to optimize advertising yields from Web sites will be in a position to increase its valuation multiple folds," said David Liu, AOL's SVP for social media, messaging and home pages. "We're all making good money on portals and search. The next area is to optimize the yield in social network sites."

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Those social networks and blogs are up for grabs, Liu said. Miller Tabak & Co. analyst David Joyce says AOL's decision to share revenue with Web developers appears to be similar to the direction others like Google are headed.

Making revenue-sharing possible, AOL Wednesday launched the AIM 2.0 Developers program, providing free access to the application source code required to build the instant messaging service into sites and applications.

More than 235,000 third-party developers have signed on to the program since AOL launched Open AIM in 2006. The AIM service has enabled developers to create and integrate applications into the instant messaging platform that let users send buddies money, or alerts to notify when friends post new pictures and videos.

The new features offered through AIM 2.0 support third-party chat services like meebo and eBuddy. Both companies have signed on to build interfaces, known as APIs, that let browsers and servers connect with AOL services for Web-based applications. Restrictions on the amount of applications that developers can build have been eliminated, too. Developers can use the Open AIM software development kits (SKIs) that include APIs to build AIM chat services internationally.

The Open AIM program asks developers to add into their applications at least two of five features, such as display ads that appear on the Buddy List or the IM window. This allows them to participate in the AIM Money revenue-sharing program. The advertisements are pulled from AOL's sister company Advertising.com. Other available services are Display Buddy Info, or Bundle the AIM toolbar.

Marketing the launch, AOL has teamed up with competition organizer TopCoder to kick off the Open AIM Developer Challenge to find the most innovative creation built using Open AIM APIs.

The competition runs from March 5 through May 6. AOL will award $100,000 in prizes, and announce the winners at the TopCoder Open in Las Vegas on May 15. Details are at topcoder.com/openaim.

Meanwhile, Bernstein research analyst Jeffrey Lindsay released a note on The Wall Street Journal report suggesting that Yahoo continue to explore other options to derail Microsoft's takeover bid, such as a merger between AOL and Yahoo.

One likely benefit that would affect AOL's AIM Money program: the two companies would likely combine Yahoo's Right Media Exchange and Blue Lithium with AOL's Advertising.com to create the largest online advertising network/exchange.

Liu declined to comment on the allegation that parent company Time Warner could merge AOL into Yahoo, but said "no other company offers this type of access to APIs, and both Microsoft and Yahoo will be scrambling to catch up."

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