As the prospect is raised of AOL (NYSE: AOL) selling its ageing U.S. ISP business to concentrate on being a publisher, it’s worth noting that AOL already did this in other countries years ago.
AOL sold its ISP businesses in the UK, France and Germany for about €1.4 billion in total, to Carphone Warehouse (2006), Neuf Cegetel (2008) and Telecom Italia (2008) respectively.
But the divestments did nothing to improve AOL’s fortunes in those countries…
Within a year of selling the ISPs, AOL’s international display ad revenue was down 22 percent, dragging down otherwise positive results in the U.S., where AOL still operated its ISP. So AOL decided on further cuts…
A review it conducted concluded: “Many international markets are unprofitable and lack the appropriate infrastructure for success. In 2010, we will exit the vast majority of those markets.”
AOL has had to reduce operations in France and Germany; sell Bebo, ICQ and Buy.at and otherwise cut jobs – actions that helped wipe $125 million off its 2010 revenue, including $80.2 million in Q4 2010 alone. The absence of $35 million in associated international losses should provide a boost in 2011, however.
It’s worth saying, AOL’s overseas fortunes have not necessarily been a direct consequence of selling its ISPs. The company had decided to be solely a publisher on the cusp of a big advertising downturn, the version of the publishing strategy that it used was more modest than Tim Armstrong’s current content-on-steroids plan, and many of those loss-making businesses were social networks rather than content sites.
But the lesson seems to be this – AOL must have a clear and well-functioning alternative in place before it ditches dial-up completely.
Also bear in mind – at $1.02 billion in 2010, revenue from that ISP business is only a bit less than AOL earns from advertising.