AOL is set to lease about $1-billion worth of patents to Microsoft, a move that commentators and analysts have predicted and encouraged for some time. AOL has since said that much of that revenue will go to shareholders. Unsurprisingly, stocks surged 45% on Monday following that announcement.
Tim Armstrong, the media company’s CEO, spoke with Marketing‘s U.S. partner Advertising Age about the deal and AOL’s future prospects.
What was the goal in selling these patents and when did the process start?
Tim Armstrong: At AOL, we’ve been working diligently on a dual track. One is the reinvention of AOL’s core business and strategy, and that’s abundantly clear: We’re turning brands into businesses. And second is the process we started to add more value to shareholders. It started last summer with the buyback of a significant amount of AOL equity and continued with us looking into whether we could unlock some of the value of our patents and IP. So in the fall of 2011 we started to focus on this.
You said that there was an auction and that Microsoft “had the most attractive bid.” Does that mean its bid was the highest?
It had the most value to us as a business.
You said that a significant amount of the proceeds would go to shareholders. Is that 50%, 75%?
I’ll just say a significant amount.
What are the chances of pursuing acquisitions with the remaining proceeds?
There are no plans to do that right now and, again, the main message is that we’ve been really focused on organic growth.
In the past week, there have been contradictory reports on Arianna’s role, with one saying she has gained more power and another saying she’s been demoted. Can you explain her role today compared with when she joined the company?
We are in the process right now of continuing to take our brands and turn them into businesses, and Arianna’s real focus has been making the Huffington Post go from being a U.S.-based blog to a global platform for business. There’s no change in the overall structure at AOL. The Huffington Post represents about 10% of our overall employees and probably less than that in revenue, and I think the focus there is to make that a much bigger business – and that’s what Arianna is focused on and will be focused on.
What’s the latest on how the Patch [AOL’s socially connected local information service] business is trending?
Patch has been doing very well from a traffic and revenue standpoint and by the beginning of March had already gotten to 80% of sales we did [all of] last year.
Will Patch reach profitability this year?
I don’t think it will be this year, but the economics around Patch continue to improve.
How are Devil ads being adopted?
Armstrong: They were adopted as an IAB standard. We established the Devil Network, and Devil continues to perform very well. We also launched more products inside of Devil that are helpful for commerce.
