AOL, Inc. Bets on Personalization Over Socialization

Here's what AOL's management has to say about its latest acquisitions.

Feb 10, 2014 at 1:00PM

AOL (NYSE:AOL) delivered its fourth-quarter results last week, handily beating analysts revenue estimates. CEO Tim Armstrong summarized the company's performance in 2013 thusly, "In 2013, AOL delivered what we told you we would deliver."

Indeed, it was a good year for the company. After its acquisition of in the third quarter, the company leapt over Google (NASDAQ:GOOGL) to become the No. 1 video ad displayer. The company's latest acquisition, Gravity, will help AOL further personalize its content for each unique viewer. Instead of relying on social data, like Facebook (NASDAQ:FB), AOL sees more value in personal data and believes Gravity will help grow traffic and ad revenue in 2014.

Here are some key quotes about AOL's potential in 2014 from the company's fourth-quarter earnings call:

The Gravity of the situation
There were a lot of questions on the call about the sort of opportunity the Gravity team presents for AOL. Tim Armstrong did not downplay his opinion of the personalization platform one bit. "We believe that Gravity is the next developing graph on the Internet."

In contrast to Facebook's social graph, which takes the opinions and interests of your friends and connections in your social network, Gravity reverses the structure. It focuses on things that you are interested in -- things you would share on a social network.

Armstrong later elaborated on how Gravity will improve AOL's revenue in 2014:

One side of the money equation is serving consumers better content more often which leads to traffic growth. Traffic growth leads to the ability to serve more impressions. Enhancing those impressions ... with data from Gravity allows us to potentially have a higher cost per ad overall. So there is a true network effect underneath Gravity.

That's not to say Facebook's social graph doesn't work well at improving ad targeting. Last quarter, Facebook increased its average ad price 92%. Interestingly, Facebook is still slightly behind AOL in average revenue per user, but if it continues growing ad prices anywhere near the rate it did last quarter, it won't be long until it overtakes AOL.

Adap.ting internationally
Management also sees opportunity in leveraging its current assets to expand internationally. Prior to the acquisition, had a very small presence internationally, and CFO Karen Dykstra believes the opportunity abroad is both "enormous" and "tremendous." "With the combination of, our assets that we already had internationally including AOL On and Be On and our Networks group, I think the opportunity is tremendous internationally."

AOL has a strong track record of expanding its acquisitions internationally. The Huffington Post, which it bought three years ago, was a U.S. only publication in 2011. Now, it spans five continents and will reach two-thirds of the world's GDP in 2014.

The company has the opportunity to integrate Gravity with the video ad exchange, as it takes on Google and YouTube internationally. Last quarter, Google derived 56% -- $8.8 billion -- of its Google segment revenue from international sites. Ad prices, however, are generally lower internationally than they are in the U.S.

But the digital video ad market is expanding rapidly, so AOL has an opportunity to capture that growth with and its web properties. Considering AOL was able to surpass Google in video advertising in the lucrative U.S. market, international expansion could lead to similar success.

Growing the network
AOL is poised for a very strong 2014 on the back of its latest acquisitions. The two purchases integrate very well with each other and the rest of the company. Gravity helps AOL increase page views, and improves its position in the rapidly expanding digital video ad market. Management has a clear plan for improving its company with these acquisitions and is not the least bit quiet about the opportunities they bring to the table.

We're putting our own money behind this opportunity
Opportunities to get wealthy from a single investment don't come around often, but they do exist, and our chief technology officer believes he's found one. In this free report, Jeremy Phillips shares the single company that he believes could transform not only your portfolio, but your entire life. To learn the identity of this stock for free and see why Jeremy is putting more than $100,000 of his own money into it, all you have to do is click here now.

Adam Levy has no position in any stocks mentioned. The Motley Fool recommends Facebook and Google. The Motley Fool owns shares of Facebook and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers