AOL has been down forever but it’s still far from out. After towering as an internet giant a decade ago and then crawling along as a zombie spin-off since 2009, the muddled media giant is ready for a third act.
AOL executives’ comments on a Tuesday morning earnings call suggest they believe the company’s future identify is tied to grabbing TV dollars and becoming a video powerhouse. And the plan is not a crazy one.
First, some context. Recall that, after getting thrown out of the Time Warner nest, AOL faced a bleak future of squeezing value from troubled content sites like Patch.com while watching its cash cow of dial-up subscribers slowly dwindle. Earlier this year, the end seemed nigh after the company sold off its patent portfolio and used the proceeds for dividends rather than reinvestment.
But now comes upbeat news. This morning, the company announced its best results in 7 years as ad networks and video platforms experienced impressive revenue growth. More striking, analysts sounded pleased as CEO Tim Armstrong and other executives described what sounded like a bona fide strategy.
That strategy involves pruning the company into three operational units: a membership and subscription group; a “content brands group” (Huffington Post, TechCrunch, etc); and an advertising group.
The first group amounts to a legacy unit that will presumably be spun off or milked for cash while the other two units could drive AOL’s re-emergence as a powerful media entity. According to Armstrong, advertisers are looking for “fewer, bigger partners” that can distribute their messages on a massive scale. If he is right, AOL is well-poised to offer ad buyers what they want through its network of content providers, partners and ad platforms.
And then there is video. Armstrong says AOL expects to do $ 100 million in video revenue in 2012 compared to $ 10 million two years ago and that video will eventually overtake display dollars. The company also claims it has moved from #27 in overall video views to #2, behind only YouTube. Finally, AOL predicts that 2013 will see more and more TV dollars pouring into its sprawling video properties.
If these predictions are even partly correct, it means that AOL has a leg up in the emerging (and lucrative) video ad market and that it will have to be less pre-occupied with the problem of mobile media consumption that keeps up other publishers up at night. Finally, AOL appears to be less distracted by pet projects like Patch which it has slimmed down and even predicts will be profitable by late next year.
AOL’s promise to pull off a third act as a video star doesn’t mean it has turned the corner on the soap operas and dysfunction (hi there, Arianna) that have plagued it in recent years. But it does mean that, for the first time in years, the company looks to have a fighting chance at a comeback.
(Image by Matej Pavlansky via Shutterstock)
 |
 |