- AOL has sold three of its shuttered music websites to
Townsquare Media Group for an undisclosed amount.
- AOL is looking to increase its profitability by focusing on
its core content business and developing new products for its
- Content is important for AOL as it drives page views and
unique user count across AOL properties, thus, increasing its
display ads revenues.
In its efforts to improve profitability, AOL (
) has announced that it is selling three of its shuttered music
assets to Townsquare Media group. AOL has been selectively selling
its non-profitable products so that it can focus on its core
content verticals and offer new products for these profitable
services. We think that selling its music assets is a step in the
right direction as the industry is highly competitive with a number
of players and AOL has not been able to monetize its music
platform. Moreover, AOL can now plough back the money from the sale
into developing content for its platforms, particularly its local
news social offering, Patch.
See our complete analysis for AOL here
Exit From Online Music
In its Q1 CY13 earnings announcement, AOL had stated that it was
winding down its music business as it looks to cut costs in non
profitable divisions and reinvest money in developing content for
its profitable core business. AOL music ranks 6
in the music website industry with over 10 million unique visitor
count. AOL music did not achieve the same level of user engagement
as some of the competitors such as Pandora and Spotify, but
consistently lost market share in the music industry.
However, AOL has announced that it has reached a definitive
agreement with Townsquare Media group to sell three of its
shuttered music properties that include
and NoiseCreep for an undisclosed amount. We believe that this will
augur well for AOL as it can now use the money from the sale to
develop content for its display ads business.
Why AOL Needs To Invest In Content
According to our estimates, AOL currently derives 27% of its
value from display advertising, revenues for which are primarily
dependent on the number of pageviews across its platforms. A strong
content offering which promotes user engagement, can drive page
views across AOL sites and drive revenue growth at AOL.
We believe that AOL must invest in its social offering Patch to
increase user engagement so that it can challenge competing
websites such as Facebook (
), Google (
) and Yahoo! (
). AOL has maintained that Patch will be a profitable venture
for the company. Although the unique user count at the recently
re-designed Patch did increase to over 13 million unique users, but
AOL has yet to monetize this platform. Going ahead, if AOL
can increase Patch's market reach by offering more local content
across more geographies, it can further increase its unique visitor
count and pageviews.
We currently have a $27 price estimate for AOL, which is
approximately 25% below the current market price.
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