Contact: Scott Denne
Four years ago, upon buying Patch Media, a network of local news and information websites, AOL’s CEO declared that local content would be a core focus for AOL. Now, after failing to make the unit profitable, the company is handing a majority stake and management of the Patch business to Hale Global.
The deal shows that AOL is not only rethinking its local content strategy, it’s also rethinking the entire content strategy that’s driven its dealmaking for many years as the company increasingly favors advertising infrastructure over its content assets (blogs, news, video). Patch is AOL’s second divestiture of a content asset since the start of the year and its fifth such move in the past 12 months.
Prior to beginning this round of divestitures, AOL spent $1.4bn on 24 content companies, including social networks, photo-sharing sites and popular blogs, over a five-year span, according to The 451 M&A KnowledgeBase. Those deals have come to a halt since the divestitures began and AOL’s only acquisition in the meantime was its $465m reach for video ad tech vendor Adap.tv, its biggest transaction since the $850m purchase of social network Bebo, which it has since sold (for pennies on the dollar, we might add).
Ad tech revenue is growing faster than any other AOL business and is well on its way to becoming the company’s largest division. Its revenue from enabling the buying and selling of ad inventory grew to $149m in its most recent quarter, up 32% from the year-earlier period. Advertising revenue from its own properties (largely powered by in-house technology) grew only 4%. Even in the quarter before buying Adap.tv, AOL’s ad tech revenue was still its fastest-growing segment, with year-over-year growth of 9%.
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