Time Warner is planning to part ways with AOL at the beginning of December, nine long years after the companies merged and basically nothing came of it. Time Warner shareholders will receive one AOL share for every 11 shares of Time Warner, valuing the company at around $3.5 billion, or about $100 billion less than Time Warner paid in 2000. Now the question remains: what role will AOL play in the future? As AOL cuts costs and staff to create a leaner, more shareholder friendly entity (it announced this morning that it would cut one-third of its workforce to save about $300 million), the company could find itself freeing up some cash that would potentially enable it to make some smaller, strategic acquisitions to get it back in the game.
There’s no doubt AOL has fallen in market share when it comes to the most important areas recently — the company is at the bottom of the search pool (2.9% market share in October, compared to 3.9% at Ask.com, 18% at Yahoo, 9.9% at Bing and 65% at Google). Last quarter, AOL’s revenues sank 23% to $777 million, with the biggest drops in subscription revenues for its internet service (down 29%) and advertising (down 18%). AOL relies heavily on display advertising, for which social networks are now taking 20% of the profits. And adding insult to injury, search advertising has rebounded better than display, posing an even bigger problem for AOL’s revenue pool.
But there is a glimmer of hope for AOL. The former Internet giant still brings in a decent share of monthly visitors. AOL.com has held pretty steady at between 52-55 million unique visitors over the past year, about 3 million more than both Bing and Ask.com, according to Compete.com. And while it is still nearly 100 million visitors away from the traffic at sites such as Google and Yahoo (about 146 and 135 million visitors in October, respectively), AOL still has a solid user base that has the potential to make waves.
The company has not been shy when it comes to making social media acquisitions over the past few years either. Since 2007, AOL has acquired three social media companies, and most recently branched out into acquisitions of hyperlocal news providers. Although it appears none of these acquisitions have panned out, AOL’s traffic and properties could make it an attractive social media play – and acquisition target down the road. In the meantime, while big plays like Twitter and Facebook are likely out of the price-range for AOL, a growing number of social media and mobile startups have potential to re-stoke AOL’s growth, its biggest concern at the moment.
AOL Acquisitions Since 2007
