America Online (AOL), once the leading Internet service provider, is rejuvenating its flailing brand by expanding its portfolio of products and services, recruiting talented leadership, and moving assertively to capture market share in the burgeoning mobile advertising industry.
Opportunities
AOL's growing suite of products and services builds on its core competencies in the buy-side and sell side of media. While a merged AOL/Time Warner continuously bolsters its presence in print and online publishing, the company is making great strides in unconventional media solutions, including mobile.
Threats
AOL must face off against such firms as Google, Yahoo and Microsoft. In addition, MySpace, Facebook and Fox Interactive Media also compete with AOL for internet based revenues. Also, other traditional media firms have begun to offer their own internet services, among them are WPP Group (24/7 Real Media) and ValueClick. Broadband access providers also compete against AOL for internet subscribers.
Google is the main web search provider for nearly all of AOL network and products. AOL has agreed to use Google's algorithmic search and sponsored links on an exclusive basis through December 19, 2010. Failure to renew the agreement with Google will adversely affect the company's operations. In addition any unilateral change Google may make in pricing, algorithms or advertising terms, could have a significant negative impact.
Strengths
AOL Web Content Services Division reached 75 million unique visitors in 2009 according to comScore Media Metrix data. AOL's internet access subscription service is one of the largest in the US and Mapquest is one of the most prominent map and direction service in the US.
Weaknesses
Recent data show a downward trend in revenues for AOL. In FY 2008 AOL reported a drop in revenues from $7, 786 in 2006 to $4,165 million in FY2008, representing a negative compounded annual growth rate (CAGR) of 27%. The decline is primarily due to the decrease in the number of domestic AOL brand subscribers and the sale of AOL's German access business. Also, AOL revenues as a percentage of total revenues declined 17.8% during the same period.
|