Since its spin-off from Time Warner (
) in December 2009, AOL (
) has pushed forward with a variety of strategic initiatives
to resurrect its struggling business. These decisions include
several acquisitions aimed at driving traffic to its site and
creating new opportunities for online ad monetization. AOL competes
directly with Yahoo (
), Google (
The New York Times
) and Facebook for online advertising dollars.
Our price estimate for AOL stock stands
, which is about 20% above market price.
Shift from Pure Online Advertising to Subscription-Based
Some companies have begun to diversify their online business
from pure advertising to subscription-based service. NYT, for
example, recently launched a new paywall for its online edition.
Under this structure, NYT is offering a limited amount of content
for free; "heavy users", on the other hand, will be charged a
Although a company's shift from pure online advertising to
subscription business creates new revenue opportunities, it also
adds the risk of user attrition. These users often move on to other
freely available content, especially if the subscription content is
not particularly differentiated.
Much of Online Content is Still Free
Due to the risk of user loss, many companies have avoided a move
to the subscription model. For example, AOL depends heavily on
the advertising revenues generated from freely available content on
its site. AOL has not indicated any plans to foray into
subscription-based content, even though its content has improved
through recent acquisitions. Recent acquisitions like Techcrunch
and The Huffington Post are still free content sites, and some
might argue that these even have better content than many big-name
subscription based sites.
Can AOL Benefit from NYT's Paywall?
Does this mean that AOL stands a chance to benefit from the risk
associated with NYT's paywall? AOL's improving content strategy has
definitely made this a possibility. NYT has about 30 million users
that visits its site every month, while AOL has about 110
If some of NYT's loyal user base migrates to AOL, it could spark a
jump in traffic on AOL's sites. You can test this affect on AOL's
stock value by dragging the trend line in the interactive chart
See our full analysis and $23.94 price estimate for