AOL Goes 'Local' with $10M VC Fund

Washington Business Journal

AOL Inc. continues to bet on local content, establishing a $10 million venture capital fund it will use to make investments in startups focused on local markets.

AOL said it will also increasingly incorporate local content on its AOL.com homepage, using geographical targeting to match content to where a user is located.

“Local is one area of the Internet that has not been built out in an extensive way,” said AOL CEO Tim Armstrong. “While there are companies in the local space, AOL has the technology to digitize the local space at scale. We believe it is an untapped market for the most part and one of the largest commercial opportunities online that has yet to be won.”

AOL will also expand its Patch network, a local content and advertising network of community focused content. It already has a presence in about 40 cities and will add 15 more. As part of that expansion, AOL will hire local editors in each town it serves.

AOL will also relaunch its City’s Best network, local entertainment guides, in 25 cities by this fall.

AOL, whose spinoff from Time Warner Inc. was completed in December, is betting its future on content, much of it provided by outside sources. Its Seed.com portal is specifically for freelance journalists, writers, photographers and videographers who are seeking out assignments or who submit original content.

AOL has also been investing in technology, acquiring dozens of small companies whose technology can enhance its own multimedia and marketing capabilities.

AOL had $239 million in 2009 earnings, compared to a $1.5 billion loss in 2008.

AOL has cut its workforce by a third, mostly through layoffs after a participation in voluntary buyouts fell short of goals. The company had 2,400 employees in Northern Virginia at the end of 2009. It moved its corporate headquarters from Dulles to New York in 2008.

AOL May Sell ICQ To Russia's DST

Wall Street Journal

AOL Inc. is in talks to sell its ICQ instant-messaging service to Russian Internet-investment group Digital Sky Technologies, according to people familiar with the matter.

Discussions between AOL and the prominent Facebook investor are still in the early stages, and AOL has reached out to other parties as well, according to a person familiar with the talks. The deal could fetch between $200 million and $300 million, this person said.

Digital Sky Technologies owns pieces of a number of Russian Internet properties, including Russia's largest Web site, Mail.ru, and a Polish social-networking site. But DST, run by Russian businessman and Internet investor Yuri Milner, is best known for buying a $200 million stake in Facebook.

ICQ has been eclipsed by other instant-messaging services in the U.S., but it remains popular overseas. In October, ICQ's largest markets were Germany, with 12.6 million unique visitors, and Russia, with 8.4 million unique visitors, according to research firm comScore.

The talks come just after AOL has completed its spinoff from media giant Time Warner Inc. AOL CEO Tim Armstrong said last week at the UBS Global Media and Communications Conference that AOL is evaluating shedding some of its assets "that don't make sense" with the company's new focus.

Also on the block could be second-tier social-networking site Bebo, which AOL acquired for $850 million last year, according to a person familiar with the situation.

AOL is trying to move from its roots as a subscription-based service for logging on to the Internet to an advertising-supported digital media company. Last year it generated much of its revenue and most of its profit from the Internet-access portion of its business. AOL doesn't break out revenue from its instant-messaging services.

Mr. Armstrong is trying to shore up AOL's double-digit-percentage declines in subscription and advertising revenues as well as drop-offs in traffic to its sites and services, which include the AOL.com home page, e-mail, instant messaging and mapping site MapQuest. He intends to refocus AOL on becoming a top producer of digital news, information, entertainment and other content, while maintaining AOL's traditional presence in e-mail and instant messaging.

AOL wasn't in a hurry to make any deals until after its separation from Time Warner, according to a person familiar with the situation. A spokeswoman for AOL declined to comment on Sunday on news of any deal talks.

AOL acquired ICQ's parent company, Tel Aviv-based Mirabilis, in June 1998 for $287 million in cash and additional performance-related payments of up to $120 million. Soon after buying ICQ, however, AOL's own instant-messaging service—now known as AOL Instant Messenger—became more popular in the U.S.