Huffington Post And Whether It's Good Or Bad For AOL
AOL: A Business Model In Transformation
Shaun Currie, CFA
Shaun Currie, CFA
Buy AOL: 2013 Will Be A Pivotal Year
Helix Investment Research • 10 Comments
Helix Investment Research • 10 Comments
Jun. 23, 2015, 10:06 AM
- Just 42 days after announcing a deal, Verizon (VZ +0.8%) has wrapped its $50/share cash acquisition of AOL, as its tender offer expired at midnight last night.
- AOL will no longer be traded on the NYSE and is a wholly owned subsidiary of the telecom. Some 60.4% of shares were validly tendered, and other shares have been converted into a $50 cash right.
- Tim Armstrong will continue to lead AOL operations, but now by reporting to Marni Walden, Verizon's executive VP of product innovation and new businesses. Bob Toohey, president of Verizon Digital Media Services, will report to Armstrong.
- Previously: Verizon CFO: We're keeping Huffington Post, not buying Dish Network (Jun. 15 2015)
- Previously: AOL chief to net $179M from Verizon deal (May. 14 2015)
- Previously: Not the old AOL: Verizon purchase all about ads (May. 12 2015)
May 12, 2015, 3:44 PM
- After earnings last week, AOL CEO Tim Armstrong pointed out how programmatic ads were key to the company's growth -- and now they're the key to its $4.4B acquisition by a video-focused Verizon (NYSE:VZ).
- For Verizon, the timing and focus will be on an upcoming video service that is likely to focus on shorter clips rather than long shows (in keeping with their stated target of mobile-viewing millennials) and would combine key assets in the OnCue service it bought from Intel and the ad-insertion tech that AOL provides. The benefit would come in faster, better ad sales. AOL's Platforms unit grew revenues 21% to $279.8M.
- Wells Fargo's Jennifer Fritzsche points out the difference between Verizon's strategy and that of AT&T: "While T believes there is a greater need to own more physical infrastructure (through DTV), VZ is building up more assets to strengthen its 'mobile first' OTT initiative -– with advertising playing a key role."
- Verizon's approach to video is cheaper, too, notes Andrew Dowell in comparing a 4.4B AOL deal with a $49B DirecTV deal: "Verizon is going after millennials. AT&T has its eye on their parents."
- Meanwhile, Macquarie has downgraded Verizon to Underperform, from Neutral, with a new price target of $45. Shares today are trading down 0.4% to $49.61; AOL is up 18.5% to $50.47.
May 12, 2015, 9:16 AM
May 12, 2015, 7:08 AM
- The $50 per share deal will take the form of a tender offer followed by a merger, with AOL becoming a wholly-owned subsidiary of Verizon (NYSE:VZ). AOL chief Tim Armstrong will continue to lead the company after the deal closes.
- "Verizon's acquisition further drives its LTE wireless video and OTT (over-the-top video) strategy. The agreement will also support and connect to Verizon's IoT (Internet of Things) platforms, creating a growth platform from wireless to IoT for consumers and businesses," says the company.
- Closing is expected this summer.
- AOL +18% premarket to $50.25, VZ -0.95%
May 8, 2015, 12:18 PM
- AOL has surged to its highest levels since February after beating Q1 estimates amid low expectations. 19% Y/Y increases in AOL properties search ad revenue and ad sales to 3rd-party properties (to $116.4M and $231.6M, respectively) offset 4% and 6% drops in display ad sales for AOL sites and subscription/ISP revenue (to $130.5M and $141.6M).
- Ad details: Total search revenue rose 28%, lifted by higher revenue/search. 3rd-party properties revenue benefited from higher sales of premium ad formats (inc. video) and growing adoption of AOL's programmatic ad offerings (big investments have been made). Display ad sales on AOL sites were hurt by lower PC ad impressions and a salesforce restructuring.
- Other numbers: U.S. ISP subscribers fell by 3% Q/Q and 11% Y/Y to 2.16M; ARPU -2% Q/Q and +7% Y/Y to $20.83. Average monthly multi-platform visitors for AOL properties totaled 190M, -3% Q/Q and +12% Y/Y. Free cash flow was $13.4M, above net income of $7M. Only $4M was spent on buybacks.
- Cantor (Buy) thinks the Q1 numbers indicate "AOL is making good progress on its transition to becoming the home of more programmatic, video and global platforms." It adds cost controls provided a lift to EPS, and that the Brand Group (covers AOL properties) saw 8.2% Y/Y revenue growth after posting a 1.3% Q4 decline.
- Q1 results, PR
May 8, 2015, 9:16 AM| May 8, 2015, 9:16 AM | 4 Comments
May 5, 2015, 9:55 AM
- Believing restructuring efforts and an industry shift towards programmatic (automated) ad buys are pressuring near-term sales, Goldman's Debra Schwartz has downgraded AOL to Sell ahead of Friday's Q1 report, and cut her target by $6 to $38.
- Schwartz also notes a "monetization gap" exists between AOL's mobile and PC traffic - about half of the company's Q4 traffic came from mobile - and thinks AOL's ad ops could underperform long-term as firms such as Facebook expand their off-platform ad offerings.
- The downgrade comes after Yahoo, Yelp, and LinkedIn reported soft Q1 sales that were blamed in part on programmatic. AOL has been investing heavily in its programmatic ad tech offerings - the company's ONE platform, which aims to provide an integrated programmatic ad-buying solution across various media channels and data sources, launched last month.
- Last year: Programmatic ads pose challenge for Web publishers
Feb. 11, 2015, 12:14 PM
- "I would expect domestic display revenue to decline in high single digits in the first half of the year," CFO Karen Dykstra stated on the Q4 CC.
- The remarks come after AOL reported display ad sales for AOL properties fell 6% Y/Y in Q4, and U.S. PC visitors to AOL sites fell 11%. Yahoo's display ad ops are also having a rough time amid an industry shift towards mobile ad sales, programmatic (automated) ad buys, and native ad formats such as sponsored stories.
- Dykstra promises AOL's salesforce restructuring (first reported last month) will boost ad sales in 2H15, and moreso in 2016.
- Shares have fallen to their lowest levels since October.
- Q4 results, details
Feb. 11, 2015, 9:29 AM
- AOL's display ad sales for its own properties fell 6% Y/Y in Q4 to $171.5M, worse than Q3's flat growth and driving the Q4 revenue miss. The loss of disposed/shuttered brands such as Patch had a $12M revenue impact vs. $10M in Q3.
- Contributing to the display weakness: Average U.S. monthly PC visitors to AOL properties fell 1% Q/Q and 11% Y/Y to 107M. Mobile growth apparently wasn't able to offset.
- AOL properties search revenue was healthier, rising 6% to $108.2M (3% growth in Q3). 3rd-party properties revenue rose 16% to $259.9M thanks to the Adap.tv video ad unit and programmatic ad sales growth. Other revenue (service/platform fees) grew 48% to $22.6M. Across business segments, programmatic revenue grew 250% in 2014.
- Subscription (dial-up ISP) revenue fell 5% (same as Q3) to $148.1M. U.S. subscribers fell 3% Q/Q and 11% Y/Y to 2.22M. ARPU was $21.18, down slightly from Q3's $21.35 but up from $20.01 a year ago.
- Free cash flow was $85.8M, +42% Y/Y and exceeding adjusted net income of $75.8M. Cost of revenue rose 6% Y/Y to $526.2M (compares with 5% revenue growth), and G&A spend fell 3% to $82.1M.
- Q4 results, PR
Feb. 11, 2015, 9:13 AM
Jan. 28, 2015, 10:43 AM
- Citing rising competition, Wells Fargo has downgraded AOL to Market Perform ahead of its Feb. 11 Q4 report.
- The downgrade comes on a week that has seen Re/code report AOL is likely shuttering gaming site Joystiq and carrying out a major restructuring of its ad sales teams. The latter is said to be driven by the online ad market's ongoing shift towards programmatic (automated) ad buys; programmatic now accounts for 40% of AOL's ad business.
Jan. 12, 2015, 12:19 PM
- Though it likes AOL's improving asset portfolio, Cowen is less fond of the company's valuation at current levels, and is thus downgrading to Market Perform.
- Shares remain above where they traded before Bloomberg reported last week Verizon had approached AOL about a possible acquisition or JV. Both Verizon and AOL dismissed the M&A talk, but didn't comment about the reported JV discussions.
- AOL currently goes for 19x 2015E EPS, and 1.4x 2015E sales. The 2015 revenue growth consensus is at 7.6%.
Jan. 8, 2015, 11:39 AM
- Though Marissa Mayer (NASDAQ:YHOO) is reportedly uninterested in a deal and Tim Armstrong (NYSE:AOL) has dismissed the M&A speculation swirling around his company, activist Starboard Value is once more reiterating its call for a Yahoo/AOL merger.
- Starboard argues a merger would yield cost synergies of $1B-$1.5B/year, help Yahoo carry out "a tax-efficient separation" of its Alibaba/Yahoo Japan stakes, and create "a strong growth platform given AOL's progress in mobile and video advertising."
- The firm also says it's "increasingly concerned" about reports stating Yahoo is thinking of making a big media acquisition with its Alibaba IPO proceeds. In addition, it's not happy with speculation Yahoo is "considering a cash-rich split-off as a structure to separate its non-core minority equity interests," rather than "a spin-off structure or other available alternatives to unlock the full value of the stakes in Alibaba and Yahoo Japan."
- Yahoo has said it will offer more details about its plans to tax-efficiently monetize its remaining Alibaba stake during its Q4 earnings CC (set for Jan. 27).
- Both Yahoo and AOL are rallying. The Nasdaq is up 1.7%.
Oct. 27, 2014, 5:40 PM
Oct. 22, 2014, 10:22 AM
Oct. 20, 2014, 4:04 PM
- Though Starboard Value has called on Yahoo to merge with AOL (AOL +3.1%), there are "no explicit talks about a deal with Yahoo," says CEO Tim Armstrong. As it is, Re/code has reported more than once Marissa Mayer isn't a fan of an AOL/Yahoo deal.
- Armstrong also declares the online ad market is going to see a major shakeup, with future solutions for marketers either completely programmatic (automated) or custom-made. "Everything in the middle is going to die."
- AOL has been betting big on programmatic growth; the company claims over 1/3 of its ad sales now come from programmatic offerings. Last month, AOL expanded its partnership with ad giant Publicis to cover programmatic video and linear TV ads.
AOL Inc is a media technology company that provides internet content with brands, products and services that it offers to consumers, advertisers, publishers and subscribers.
Industry: Internet Information Providers
Country: United States
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