AOL Attempts to Reinvent Itself with Acquisition

AOL Attempts to Reinvent Itself with AcquisitionNEW YORK – AOL (NYSE:AOL) returned to the news on Wednesday announcing the acquisition of video platform for $ 405 million in an effort to develop their online-advertising business.  The deal will provide AOL access to advertising technology that the world’s largest companies use by pairing ad buyers with ad sellers. 

For AOL, this is an opportunity to reinvent itself as the company, which at one time was synonymous for the internet.  According to Dan Frommer at SplatF, AOL still has more than 2.6 million dial-up subscribers, and the company has been raising rates in a cynical attempt to squeeze more revenue the company’s top revenue stream, decreasing 5.6 percent to $ 166 million in the quarter just ended.

During a press conference to announce the deal, AOL Chairman and CEO Tim Armstrong noted that ‘Two trends are prevalent in the video space right now—the movement from linear television to online video and the shift from manual transactions to programmatic media buying. is positioned squarely in front of the huge opportunity these trends are presenting.’

The acquisition of is AOL’s largest since 2011 when the company bought The Huffington Post.  However those deals pale in comparison to the AOL’s tech boom heyday when it acquired MapQuest for$ 1.1 billion, Netscape for $ 4.2 billion, and the failed mega-deal between AOL and Time Warner (NYSE:TWX) that was valued at the time at more than $ 350 billion; that deal is still the largest in U.S. History.

In perspective, Armstrong is trying to reposition AOL to compete with Google (NASDAQ:GOOG) in the ad technology space.  A move that is hastened by the ongoing loss of AOL subscribers. According to analysts, there is some early evidence to suggest Armstrong’s plan is working as displaying advertising revenue has increased, and the company has targeted $ 100 million in video revenue.  However, the playing field is crowded as Amazon (NASDAQ:AMZN), Netflix (NASDAQ:NFLX), and Disney (NYSE:DIS) subsidiary Hulu are also exploring new ways to deliver content.

In the second quarter, AOL earned $28.5 million down from $970.8 million a year ago, when Microsoft (NASDAQ:MSFT) purchased patents from the company.

For comments and suggestions, leave a message in the comments section below. Like and Follow our Facebook page for more stories and to stay up-to-date with the latest happenings.

About the author

Audrey is a senior editor for the business and finance sections.