ICahn-Lazard Report: The AOL Dream That Went Wrong

The Lazard report on Time Warner has extensive background and suggestions on AOL.

Some points from it (and check out the AOL SWOT analysis chart on page 52):

– AOL has enjoyed little-to-no identifiable benefit from its association with TWC, as AOL and Road Runner continue to compete with each other in the TWC franchise territory.

– There is little evidence that TWX content has had a material impact on the attractiveness of AOL’s offering in the eyes of customers. Currently, the primary consumer benefit of the AOL service offering promoted in media campaigns is AOL’s security features, not any proprietary TWX content. At present, the most prominent form of traditional media featured on the AOL site is music, suggesting an obvious potential area for synergies, but TWX elected to divest its market
leading music franchise in early 2004.

– AOL’s relatively passive strategy of partnering rather than investing
directly had a significant opportunity cost. In committing to partnerships with third parties, AOL did not invest in developing or acquiring its own services in those areas.

– Today, key areas of focus include the commercialization of paid search listings, the development of applications like social networking that leverage user contributed content, and the development of consumer VoIP offerings. These initiatives do little to leverage the traditional media assets of TWX.

– AOL will need to move quickly to reposition its product and revenue mix. To do so, AOL may need the flexibility to take actions that could compromise short-term profitability but are in the best interests of building long-term value.

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