MOST Thursday afternoons at AOL’s New York headquarters a bell rings to announce “happy hour”, and staff flock to a keg in a meeting room. They hope they at last have cause to celebrate. “If you look at the analyst models, they had AOL never getting back to growth,” says Tim Armstrong, the firm’s boss. But in the fourth quarter of 2012, AOL’s revenue rose for the first time in eight years. Its share price has surged by more than 50% in the past year.
Cultivating a media brand takes time. People said Google paid too much for YouTube ($1.7 billion in 2006), but now it is clear that it was a smart buy, says Eric Sheridan of UBS, a bank. It could be years before AOL’s content brands can silence the doubters. Meanwhile it is spending a fortune on original content even as rivals such as Yahoo and Amazon muscle into the same area.
AOL’s share-price surge should not be seen as an endorsement of its content strategy. Last year the firm sold 800 patents to Microsoft for more than $1 billion, and used the bulk of the proceeds to buy back stock. Mr Armstrong likes to remind people that he is AOL’s biggest individual shareholder, so he has an incentive to do right by the company. He has done much to revive a firm that others thought dead. But after just one quarter of growth, perhaps it is too early to tap the kegs.
AOL’s share-price surge should not be seen as an endorsement of its content strategy. Last year the firm sold 800 patents to Microsoft for more than $1 billion, and used the bulk of the proceeds to buy back stock. Mr Armstrong likes to remind people that he is AOL’s biggest individual shareholder, so he has an incentive to do right by the company. He has done much to revive a firm that others thought dead. But after just one quarter of growth, perhaps it is too early to tap the kegs.
