Check the fertility calendars. Time Warner's
A Bloomberg article over the weekend reveals that AOL plans to launch at least a dozen new websites in the next six months, to widen its network of high-margin online advertising.
AOL has worked on creating niche websites since the acquisition of Weblogs, Inc., a portfolio of 85 popular specialty blogs. Recent additions to the AOL content library include the launch of music site Spinner.com, and the rollout of men's lifestyle site Asylum.com, a cross between Maxim, GQ, and Radar.
It's easy to see why AOL is moving in this direction. The organic traffic that used to fall into its lap when it boasted tens of millions of dial-up access subscribers is all in the past. AOL has to earn its traffic now.
AOL's access business begins 2008 clinging tenuously to 9.3 million subscribers. In its prime six years ago, paying accounts peaked at 26.7 million members.
Mixed blessing for mixed-greens dressing
The defections haven't been fatal. The plan to replace low-margin access with high-margin interactive advertising appears to be working on pro-forma paper. AOL took a top-line hit this past quarter, but adjusted operating profits, before depreciation and amortization, actually rose by 29% at AOL.
Shedding the costly support infrastructure necessary to keep Internet users afloat has been a blessing, albeit a mixed one. Now that AOL is seen mostly as a gateway for free e-mail, a popular IM platform, and specialized content sites, what kind of visitors will it likely attract?
You don't need to turn to me for the answer. You see it happening at other sites that follow the same strategy. Yahoo!
AOL ranks fourth. The more it relies on free content, the more it begins to resemble Yahoo! and Microsoft, with their dependence on gratis e-mail to keep cybersurfers close.
No, Google didn't erect tollbooths while you were sleeping. Big G still relies on Internet advertising for 99% of its revenue. However, Google's stronghold is in search -- consumers arrive at the company's doorstep with the intention of going somewhere else. That's what AOL used to have when its subscriber rolls brimmed with members. As AOL becomes more of a destination than a gateway, it will have to rely more on impression-based display advertising than the juicy, lead-conjuring paid-search spots.
Content is not king
Perhaps the biggest caveat to AOL's approach comes from someone who has worn those same shoes. Yahoo! was buzzing a year ago about Brand Universe, its initiative to create narrow specialty sites devoted to fans of everything from Harry Potter to "The Office."
Yahoo! has cooled on that idea, a decision probably based on more than last month's need to whack away at its headcount.
Everyone loves the "content is king" mantra, but content is starting to resemble the village idiot. Is there a better publicly traded content-site collection than CNET Networks
Other domain-rich eyeball magnets such as Marchex
Unless that content prods consumers to marketable decisions, it's just billboard space that becomes a blur on the Autobahn. AOL can't simply create content for content's sake. That king was dethroned -- and disrobed -- a bubble ago.
Time Warner has been a Motley Fool Stock Advisor newsletter selection over the years. CNET has been singled out twice in the Rule Breakers growth stock subscription service. Microsoft has made the cut as an Inside Value stock pick. Read all about them with a free, 30-day trial subscription.
Longtime Fool contributor Rick Munarriz's talents are closer to food testing than royalty, but even he can see that the content emperor is in the buff. He does not own shares in any companies in this story. He is also a member of the Rule Breakers analytical team, seeking out the next great growth stock early in its defiance. The Fool has a fully clothed disclosure policy.
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