America Online (AOL) has dramatically changed as a company since its peak as the largest internet provider in the United States in past decades. Over the last couple of years, AOL has embarked on a turnaround strategy under the leadership of Chief Executive Tim Armstrong. The strategy intended to transform AOL from a subscription based internet provider to a digital media company, who invests in online websites and content, generating revenue through advertising sales.

Following this strategy, AOL is now the operator of sites such as the Huffington Post, Patch, and TechCrunch and has positioned themselves to collect on the inevitable transition from television to digital and internet based advertising. Additionally, AOL has invested heavily automated advertising exchanges, a technology that accumulates consumer data and trends across a spectrum of different websites, enabling them to sell advertisements directly to marketers. This will benefit marketers as they can by ad slots based on needs and will not have to negotiate and broker deals with websites.

In the news this week were reports on AOL’s third quarter results from 2013. The company posted earnings $0.04 per share above estimates, and also revenues six percent above estimates. The company has done this through the expansion of their digital capabilities with the acquisition of Adap.tv and also through increased advertising technology revenues. Adap.tv is part of AOL’s strategic plan to invest heavily in automated advertising exchanges. This is being heralded by the media as a big step towards a trend in digital advertising sales and the “automation of advertising.”

Side-note: Even though net income decreased in the third quarter results, this is attributed to the restructuring of the Patch network and not reflective of AOL’s total performance.

Chief Executive Tim Armstrong believes AOL is building itself into one of the leading technology companies in the industry and paving the way for advertising technology. In my opinion, Armstrong has done a tremendous job turning around AOL. He has taken a long term investment approach and has stuck with his turnaround strategy amid much turmoil. When he took over AOL and began investing in companies such as Patch (which he originally founded prior to joining AOL) and TechCrunch, there were many who doubted these moves in the short run and were not able to see the big picture like he has. In my former career in education research I worked on assignments pertaining to school turnarounds. From extensive research, I saw that the main factors to a successful turnaround was leadership, patience, and maintaining a long term vision. You cannot simply implement strategies and expect them to work immediately, and you also cannot fledge when there is no immediate improvement, or in this case profitability. AOL was able to make it through the first years of its transformation and transition itself into a major player in an industry that it not only believes in but is already innovating.

– Jonathan Shrem

Sources:

AOL’s Revenue Rises on Higher Ad Sales. (2013, 11 4). Retrieved from Wall Street Journal: http://online.wsj.com/news/articles/SB10001424052702303482504579179443498659788

CNBC. (2013, 11 5). Ad surge a big ‘megatrend’ helping AOL: CEO Armstrong. Retrieved from CNBC with Reuters: http://www.cnbc.com/id/101170622

Steel, E. (2012, 11 6). AOL surges on robust results. Retrieved from Financial Times: http://www.ft.com/intl/cms/s/0/a137f92c-2827-11e2-a335-00144feabdc0.html#axzz2jyq4feNQ