AOL Reboot

In early February 2011 it was announced that AOL had bought The Huffington Post for $315 million. This, as many of the American dot com era executives would have put it, is a game changer.

AOL began life in the mid-80′s, however, my experience of AOL began, like many others in the UK, during the late 90′s and early 00′s when they started to establish themselves in the UK market; they provided my internet service (dial up of course), online news, instant messaging, and most other internet related services. At the time it seemed to me, as it probably did for many of those within the company, that AOL were one of the internet giants and consequently too big to fail….almost. It is true to say that AOL were massive during their peak boasting over 30 million members worldwide and being valued in excess of $240 billion.

The start of the decline for AOL kicked off in 2001 when they merged with Time Warner with the view to becoming the world’s largest media company, the resulting company was named AOL Time Warner and was the first step in AOL’s downward spiral. The main contributive factors in this decline were AOL’s adoption of a “walled garden” approach to their service combined with a lack of interesting content and a surplus of ads, and their inability to evolve with the ever shifting internet market. From 2002 onwards AOL’s subscriber base saw no quarterly growth and by 2007 the subscriber base had dropped to just over 10 million and by the start of 2010 had fallen to below 5 million. In 2009 their time had come and Time Warner announced it would spin off AOL as an independent company, finally, in December 2009, AOL ceased to be a part of Time Warner. One of the reasons behind this move by Time Warner are reflected below in the graph which plots AOL’s drop in revenue from 2007-2009.

AOL Revenue Decline 2007-09

At this point in time AOL realised serious action needed to be taken, unbeknownst to them it was all but too late. Soon after the break from Time Warner the AOL logo was changed and implemented across all of its platforms. A year later they acquired online technology publication TechCrunch signalling the first sign of their plan to move away from internet service providing and reposition themselves as a premium content provider. Further moves in this direction have taken place with AOL all but scrapping their chat rooms and, the most significant move so far, acquiring The Huffington Post for $315 million in early 2011. Leading directly on from this acquisition AOL have announced a consolidation of its existing portfolio, with plans to fold 30 or so of its less popular websites into more established ones, and the creation of The Huffington Post Media Group, an entity that now includes all AOL media properties. The most recent developments come in the shape of a significant cut in staff, around 20%, and the identification of females as their key demographic despite the significant competition that already exists in that area in the form of sites such as Netmums and Mumsnet.

Despite Global financial services company UBS saying in March 2011 that AOL finally has more upsides than downsides with regards to investment, AOL’s actions over the last few months seem like the last throw of the dice for a once hugely powerful company. However, the significant influence held by The Huffington Post combined with AOL’s infrastructure and renewed ambition just might have the potential to be the start of AOL’s second coming. The next six months will define the future of AOL and whether all this huffing and puffing will lead to nothing.