AOL (
AOL
) competes with Yahoo (
YHOO
), Google (
GOOG
), Microsoft (
MSFT
) and Facebook in the display advertising business. The average
monthly unique visitors on AOL sites declined from around 123
million in 2008 to 111 million in 2010, as the company cut back or
shut down a few of its European operations. The sale of business
divisions like Bebo and ICQ in 2010 also contributed to the decline
in unique visitors.
Though AOL sold a few of its business divisions, it also made
several acquisitions like Patch.com, StudioNow, TechCrunch, 5Min
Media, Thing Labs and Pictela last year. These acquisitions suggest
AOL's increasing focus on content production (articles and videos)
and syndication, in order to attract more visitors to its sites and
generate more advertising revenues. AOL's recent acquisition of
Huffington Post is another step in this direction.
While we estimate AOL's average monthly unique visitors will
increase to 122 million by the end of our forecast period, Trefis
members predict a more substantial increase towards 132 million
unique visitors, implying a small upside to our price estimate for
AOL's stock.
We currently have a
$23.94 price estimate for AOL's stock
, roughly 15% ahead of market price.
AOL Enters Local News Market with Patch…
AOL acquired Patch.com, a website providing local news, in June
2009. AOL competes with Google, Yahoo and Facebook in the local
online advertising market, which is pegged at $16 billion in 2011
by Borrell Associates, a market research firm.
Patch has seen recent success in attracting more users to its
site. According to data by ComScore, Patch registered around 3
million unique visitors in December 2010, about 80 times the number
recorded a year earlier. According to AOL, Patch has established
operations in 775 towns as of December 2010. An expanding local
presence coupled with growth in unique visitors means greater
potential ad revenues for AOL. (See
Patch.com Can Lift AOL's Fortunes
)
… And Marks National Presence with Huffington
Post
AOL recently acquired Huffington Post, a prominent news and
opinion website, for $315 million. Apart from strengthening the
company's content, which is AOL's key focus, Huffington Post
brings more of a social media presence where online readers can
share news, post comments and contribute to blogs - all of which
have a personal appeal on viewers.
The Huffington Post aggregates stories from other publications
and publishes a similar number of original stories and original
blog posts. It plans for its sales to grow from $30 million in 2010
to $100 million by 2012, at a striking annualized growth rate
of 82% over two years. (See our previous articles
AOL's Huffington Post Acquisition Targets Greater
Social Media Impact
, and Huffington Post Worth More Than NY Times Online as a
Standalone Business)
Acquisitions of news and content sites such as Patch and
Huffington Post should help AOL attract more visitors and increase
the total number of ads on its sites, thereby raising its display
ad revenues.
See our full analysis and $23.94 price estimate for AOL
Trefis Community Forecast
Trefis members anticipate that the average monthly unique
visitors on AOL sites will increase from roughly 111 million in
2010 to 132 million by the end of our forecast period, compared to
the baseline Trefis estimate of an increase to about 122 million
during the same period. The member estimates imply a small upside
to our
$23.94 price estimate for AOL's stock
.