18 months ago in March 2011, the Internet & Media Leadership Group of the Prince’s Trust organised its quarterly lunch at Mosimanns hosted by member AOL. Tim Armstrong gave the talk. But, as he’d just bought the Huffington Post and had Arianna in tow, she spoke too. Indeed I sat between them. See My lunch date with Arianna Huffington. I admit that I was rather ‘taken’ by this ‘lady of robust views’. I thought she dropped too many names – then realised that she really did know them all! The 'AOL story' that Tim and Arianna told impressed me so much that I went out and bought AOL shares. But, initially, AOL shares slumped. I kicked myself for letting my heart rule my head. BUT…
Waiting a year, in Apr 12, AOL soared as Microsoft bought 800 of it patents for $1b. Indeed, AOL has since proved to be my best buy of the last two years – up over 190%.
Tonight AOL is up another 22% - this time on really rather pleasing trading results. Although Q3 revenues were flat yoy at $532m, they turned a profit of $20.8m compared to a $2.6m loss Q3 last year. The ‘old’ AOL made its money as an ISP. Indeed, it is probably still making some revenues from dialup. Although that was clearly a dying business, the 10% decline in subscriptions revenues in Q3 was the lowest decline for some time.
64% of revenues are now from advertising – up 7%. Buying TechCrunch and the Huffington Post was one part of the plan to build content-rich websites to attract views so that advertising could be sold. Another part of the scheme was Patch – basically a network of local news sites. AOL has spent $300m developing Patch. Here at techMarketView, we rather like rich content too!
AOL seems – slowly but surely – to be carving out a new business model. “To be reborn, first you have to die” is a maxim we have oft-repeated. We do not underestimate how difficult that trick is to pull off. AOL had to manage the decline of its old ‘cash cow’ ISP subscription business model, reinvent itself for the new age. And all without terminally killing itself in the process. And, you know, it seems like it might pull it off!
Footnote– When Arianna sold the Huffington Post to AOL in Feb 11 she got the $315m proceeds in cash. AOL shares were then $23. Looked an astute move as within six months they had halved. Today AOL closed at $43.7…