Content Acquisition Strategy Could Boost AOL Stock by 3%
AOL (NYSE:AOL) is betting heavily on ad-supported content as it tries to move beyond its legacy dial-up Internet access business. Continuing the content acquisition spree that began after its spin-off from Time Warner (NYSE:TWX) last year, AOL recently acquired the popular technology blog Techcrunch for an undisclosed sum. Techcrunch has more than 3.8 million monthly unique U.S. visitors, according to Comscore data cited in the New York Times.
We see a potential 3% upside to our current stock price estimate if AOL can integrate these acquisitions strategically. Our analysis follows below.
Traffic report
- 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
We estimate that AOL averaged about 118 million monthly unique visitors in 2009. We expect this number to increase to around 127 million by the end of the Trefis forecast period. You can drag the trend-line in the chart below to create your own traffic forecast for AOL and see how it impacts the company’s stock.
[trefis_forecast ticker=”AOL” driver=”1901″]
However, AOL’s acquisition strategy could boost traffic beyond our expectations. There could be an upside of around 3% to the $25 Trefis price estimate for AOL’s stock if the average monthly visitor count reaches 140 million by 2016, instead of the 127 million that we currently forecast.
Content strategy
In addition to Techcrunch, AOL has bought several other small content companies this year, starting with StudioNow, which makes money by syndicating and selling video and other content to online publishers. In another article, we argued that the StudioNow acquisition could boost AOL’s average revenue per page view (RPM) because videos often command premium ad rates.
The next chart shows our RPM forecast for AOL. You can drag the trend-line to create your own forecast and associated price estimate.
[trefis_forecast ticker=”AOL” driver=”1906″]
Other notable acquisitions include 5min Media and Thing Labs. 5min Media is a web video syndication company that distributes video clips from about a thousand media companies. Thing Labs makes Brizzly, an online application that allows users to post and read updates to Twitter and Facebook from a single website.
You can see the complete $24.97 Trefis Price estimate for AOL’s stock here.