AOL (NASDAQ:AOL) announced, on November 13th, a new social feature to its mapping website MapQuest, called Discover.  The new addition is another step in AOL’s efforts in becoming a more social company as it seeks to gain a strong and sticky user base in the competitive tech landscape. Unlike AOL’s social network Patch, we think that the company, in Discover, has a platform which can appeal especially to travel enthusiasts and has the potential to become a travel resource for the broader internet community.
- U.S. Digital Advertising Landscape And Key Players (Part 2)
- U.S. Digital Advertising Landscape And Key Players (Part 1)
- With AOL In The Bag, What’s Next For Verizon?
- AOL To Be Acquired for $4.4 billion By Verizon
- AOL Earnings: Third Party Ads Boost Revenues Yet Again
- AOL’s ‘ONE by AOL’ To Boost Its Programmatic Ad Platform
MapQuest Discover is intended to be the social leg of the AOL’s mapping service which has lost market share over the past decade as products such as Google (NASDAQ:GOOG) Maps got into the fray. Discover allows the creation of personalized profiles with travel preferences: users can can create collections of their favorite locations, view a news feed with interesting places and popular collections of other users, and create a profile with places that we’ve visited and that they want to go.
Strong Social Element Will Drive RPM Growth
According to our estimates, AOL currently derives 22% of its value from display advertising, revenues for which are primarily dependent on the number of page views, and the quality of advertising across its platforms. A social offering such as MapQuest Discover can help the company gather data on users which it can then use to provide more targeted ads on its properties. As the quality of ads on AOL sites improves, RPM will increase over the long term.
Monetization Opportunities With Discover
We think that Discover will give AOL an opportunity to improve its advertising services due to the data that it will gather on its sites. Specifically, we think that AOL has an opportunity to gain in travel advertising since it can use a user’s traveling wish list to provide ads for hotels, flights, car rentals etc. Overall, we think that this is a lucrative opportunity as U.S. online travel ad spending is expected to reach approximately $5.6 billion by 2016, according to eMarketer. 
We think that Mapquest discover is an interesting offering by AOL which will strengthen its currently struggling social offerings. We think that Discover could post faster growth than Patch, and could be more successful over the longer turn. At present, there doesn’t seem to be a similar platform from competitors Google and Apple (NASDAQ:AAPL) and AOL can use its early entry into this market as opportunity to drive user growth going forward.
We currently have a $30 price estimate for AOL, which is approximately 25% below the current market price.Notes: