AOL (
AOL
) announced, on November 13th, a new social feature to its mapping
website MapQuest, called Discover. The new addition is another step
in AOL's efforts in becoming a more social company as it seeks to
gain a strong and sticky user base in the competitive tech
landscape. Unlike AOL's social network Patch, we think that the
company, in Discover, has a platform which can appeal especially to
travel enthusiasts and has the potential to become a travel
resource for the broader internet community.
See our complete analysis of AOL here
Platform Specifics
MapQuest Discover is intended to be the social leg of the AOL's
mapping service which has lost market share over the past decade as
products such as Google (
GOOG
) Maps got into the fray. Discover allows the creation of
personalized profiles with travel preferences: users can can create
collections of their favorite locations, view a news feed with
interesting places and popular collections of other users, and
create a profile with places that we've visited and that they want
to go.
Strong Social Element Will Drive RPM Growth
According to our estimates, AOL currently derives 22% of its
value from display advertising, revenues for which are primarily
dependent on the number of page views, and the quality of
advertising across its platforms. A social offering such as
MapQuest Discover can help the company gather data on users which
it can then use to provide more targeted ads on its properties. As
the quality of ads on AOL sites improves, RPM will increase over
the long term.
Monetization Opportunities With Discover
We think that Discover will give AOL an opportunity to improve
its advertising services due to the data that it will gather on its
sites. Specifically, we think that AOL has an opportunity to gain
in travel advertising since it can use a user's traveling wish list
to provide ads for hotels, flights, car rentals etc. Overall, we
think that this is a lucrative opportunity as U.S. online travel ad
spending is expected to reach approximately $5.6 billion by 2016,
according to eMarketer.
Conclusion
We think that Mapquest discover is an interesting offering by
AOL which will strengthen its currently struggling social
offerings. We think that Discover could post faster growth than
Patch, and could be more successful over the longer turn. At
present, there doesn't seem to be a similar platform from
competitors Google and Apple (
AAPL
) and AOL can use its early entry into this market as opportunity
to drive user growth going forward.
We currently have a
$30 price estimate for AOL
, which is approximately 25% below the current market price.
Click Here To
Understand What Drives A Stock At Trefis