TheWrap asked three Internet-area analysts about the prospects for AOL’s future after the company is spun off from Time Warner.
Greg Sterling, independent analyst who focuses on the Internet and consumer behavior for Sterling Market Intelligence
Tim Armstrong is a fairly strong leader for them. I think there’s risk involved in spinning off from Time Warner — but I think the company’s better off, because I think there will be a sense of self-control and responsibility, a sense that the company is in charge of its own fate.
I think there’s been a lot of confusion about what the AOL brand is — they’re kind of like Sears, mainstream, "we sell everything," not too far ahead or behind, this is what is working in the market so let’s do some of that. They just sat there and let the brand do all the work. There was a fear of messing with the formula.
The big risk they took was to buy Bebo at an inflated price. They have a lot of assets and a lot of smart people. There are systemic problems that afflict display advertising that they can’t do anything about. They need to be cutting out stuff that’s underperforming and redefining the brand in the marketplace.
Tuna Amobi, Senior Equity Analyst for Standard and Poor’s Media and Entertainment Group:
If you look at where they were coming from and where they are today, being part of a conglomerate has not given AOL any synergy. Look at other Internet companies like Google. AOL has not been able to take itself to another level. This spinoff allows them to stand on their own and explore strategic alternatives. That might include, say, partnering with Internet and tech firms.
They have a lot of revenue from their dial-up business now, but that is eventually going away in the future. One thing they could do is to sell that to someone who needs the cash flow in the short term.
But AOL is one of the few companies that has each of three buckets [display ads, search, and third-party advertising]. The future for them is going to be figuring out how to repackage and strategize all of them. I don’t think you’re going to see them de-emphasize any of them. The spin-off will give them some clarity. Right now that clarity is not there.
I think they arguably have the greatest reach of any ad network out there. Advertising is a strength for them. The Internet is probably still the brightest part of the overall ad landscape. It’s still the future, it’s still where the growth will come from.
Sandeep Aggarwal, Senior Internet Analyst at Collins Steward:
We think the biggest benefit AOL gets with Time Warner is being part of a big media company. But once it becomes independent it can become a pure play Internet company –- and given that the Internet landscape is highly competitive, that will help AOL to unleash its potential.
Internet advertising in general is going through a slow patch – growth is slowing down for all companies, including Google. Within that, display advertising has hurt more.
However if AOL becomes independent, I think the viability or attractiveness to display advertisers only goes up, because other media companies who did not work with AOL because it was part of Time Warner can now start working with them. For many years they have helped monetize content online for Time Warner, and now they can help a lot of other companies. All the media companies are moving more content online and they need various ways to make money.