AOL’s media business

AOL logo$500 million ($500,000,000)

The oft ridiculed and always interesting Henry Blodget (who is still banned from the securities industry) posted and interesting piece yesterday about AOL’s media business on his business and news analysis site, The Business Insider.  Entitled “There Is Something Fundamentally Wrong With AOL’s Media Business,” the article performs some interesting “cocktail napkin” calculations to arrive at the operating profit – or in this case operating loss – of AOL’s media business which he estimates at $500 million annually.  While I cannot comment on the accuracy of Blodget’s calculations (although if Patch is losing $100 million a year then the rest is easy to believe), but I do tend to agree with the rationale for his concern:

“This is not a small business trying to achieve economies of scale. This is a huge business with more than $1 billion of annual revenue that has long since achieved economies of scale. And the business still appears to be losing an absolutely massive amount of money.”

Personally speaking I’ve never seen AOL as a revolutionary Internet business, although they did possess and squander a tremendous opportunity back in the 1990s. That said I concur with Blodget, if you’re an investor in AOL there is a lot about which one should be concerned.

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