AOL, Inc. (AOL): Content-Driven Internet Advertising is a Brutal Industry

AOL’s flawed content strategy is destroying value

Last year, AOL’s content business lost $33 million dollars. The year before, it lost $48 million. Those losses might be acceptable if AOL’s content business was an early stage venture that was growing rapidly and likely to become profitable at a certain size.

In fact, its business isn’t growing at all — it’s been flat for the past three years. And, even more distasteful is that AOL spent heavily, externally and internally, to build this collection of money-losing content businesses. The cost of Huffington Post alone was $315 million.

Foolish Bottom Line

AOL needs a radical change of strategy. It should shudder or scrap its losing content business. Cash generated from the dial-up business should be invested in more sustainable and profitable ventures. Failing that, it should be returned to shareholders. Unfortunately, I doubt the company’s management has the skill to do the former, or the humility to do the latter.

The article AOL’s Fundamentally Flawed Strategy originally appeared on Fool.com and is written by Brendan Mathews.

Brendan Mathews is short shares of AOL. The Motley Fool has no position in any of the stocks mentioned. 

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