Although AOL has been around for decades, it really only attracted my interest when they bought TechCrunch and then the Huffington Post – culminating in my (Prince’s Trust) lunch date with Arianna herself. I was smitten – as many of you have realised! She and Tim Armstrong (AOL’s CEO) convinced me that they were serious in building a company based on strong content led by excellent, in-house journalism. However, as Arianna herself had taken most of the $315m proceeds of the sale in cash – rather than AOL shares – clearly her faith in the future was limited.
Indeed, since the acquisition AOL shares have crashed. Yesterday, AOL shares dropped another 20% as a net loss of $11.8m was recorded for Q2 on revenues down 8% at $542m. That’s down 60% since their Apr 10 high. The ‘problem’, and many people find this difficult to comprehend, is that AOL still makes a significant profit from its dialup internet subscriptions. But, these are declining fast (subscriptions were down 21% in the last quarter). To replace these, AOL is looking to content to drive ad revenues which were up 5% globally and up 16% in the US. They have also invested heavily to Patch – a local news service.
Since the UK version of Huffington Post was launched, I’ve added it to my favourites. I also have respect for Arianna herself who really is a gutsy lady! But, at the moment these new ventures are not growing fast enough to stem the flood elsewhere. Clearly one also has to respect Arianna also for having the foresight to take the cash rather than shares..