Key Acquisitions Lift AOL's Monthly Unique Visitors


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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, 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, 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 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 .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Investing Ideas , Stocks , US Markets
Referenced Symbols: AOL , GOOG , MSFT , YHOO

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