Purchases Are a Bid to Attract More Users to Its Web Site
Shortly after AOL announced a dramatically new business plan that included laying off a quarter of its workforce, the company recently went on a small buying spree, purchasing two firms that the company hopes will lure new users to its AOL.com Web site.
AOL recently said that it purchased GameDaily, a Web site that provides information about video games and operates a newsletter for gaming enthusiasts — the portal plans to turn into its flagship video games brand.
Under the deal with San Francisco-based Gigex Inc., AOL gets the GameDaily consumer site and newsletter. Financial terms were not disclosed.
The company is trying to cut costs as it transitions from an Internet service provider to a Web portal that provides free services and draws revenue from online advertising. Earlier this month, the company announced it would cut 5,000 positions, including several hundred at its headquarters in Dulles, over the next six months as part of that transition.
Nonetheless, AOL said it would continue to look for strategic purchases of “focused, streamlined” companies that can add value to company.
We are going to continue to look for targeted ways in which AOL can grow revenue, advertising, audience and search capability and acquire rich content that allows us to more effectively and efficiently meet AOL’s business strategies, said Nicholas J. Graham, an AOL spokesman.
GameDaily will become the flagship video games brand in the AOL Games Network, and its content united with content and community features currently found on the AOL Video Games Web site.
In addition, the AOL Video Games editorial team will be integrated into the GameDaily editorial staff. The combined team will be responsible for the GameDaily Biz newsletter.
"Video game sites have become a valuable resource for advertisers wishing to reach the young male audience, and GameDaily is a brand that resonates with these highly sought after consumers," Ralph Rivera, vice president and general manager of AOL Games, said in a statement.
The company is hoping that the purchase of privately held GameDaily will attract more men age 18 to 34 — considered to be the gaming industry’s core audience — to its Web site, executives said.
Yankee Group analyst Jennifer Simpson said AOL’s acquisitions make sense, given the company’s interest in trying to attract more users to its Web site. "Both these acquisitions seem to fit into their strongholds" of instant messaging and gaming, Simpson said.
AOL, which said GameDaily is among the most-visited sites for information on video games, is trying to boost visits to its ad-supported Web sites to offset expected revenue declines from a recent decision to drop subscription fees for many high-speed Internet users.
Graham said GameDaily visitors"are not simply casual gamers. … These are loyal, dedicated, active gamers from a demographic very attractive to AOL and advertisers. They are rigorous users of online products and features."
AOL has two gaming offerings: AOL Games provides mostly free, casual games such as Bejeweled and Sudoku that attract mostly older women; AOL Video Games provides mostly free reviews and information about popular high-tech games such as Halo, Grand Theft Auto and Dead Rising, which are popular with the mostly male audience AOL wants to attract.
Interest in this space is obviously growing from advertisers, said Rivera. He said GameDaily will operate as a separate subsidiary, but the plan is that many of the gaming enthusiasts will migrate to AOL’s Web pages. "We have been looking at: How do we take our video game efforts to another level?" Rivera said.
Similarly, AOL wants to expand its dominant position in instant messaging with its acquisition of Los Angeles-based Userplane. The privately held firm licenses its instant messaging technology to more than 100,000 Web sites, including Date.com, Friendster and internal company messaging sites.
AOL plans to increase the number of such licenses and use Userplane to extend AOL’s reach to new online communities. For example, people who chat online on MySpace about a particular topic, such as rock bands, might also begin using AOL’s instant messaging system to expand the group beyond those who use MySpace.
But AOL faces larger challenges in attracting the many users who left the company once they stopped using its Internet connection services, Simpson said.
"AOL will have difficulty reaching out to its prior users," she said. "If you have moved on to a comparable service, for example on Yahoo, Microsoft or Google, to come back to AOL would not be much of a draw, simply because they have such comparable services. The exception is IM. It is important for AOL to think about where it can draw people back in."
Earlier this week, AOL LLC said it bought instant messaging firm Userplane, which provides technology that allows users of social-networking sites, such as MySpace, to communicate with one another, and plans to integrate it with its popular AOL Instant Messenger platform.
AOL plans to add its existing AOL Games articles and features to GameDaily, while integrating the new material with AOL’s other games sites, including Games.com, which the company launched in May after buying the Web address for an undisclosed sum.
GameDaily is AOL’s fourth acquisition this year, and follows the purchase of Userplane, which provides chat and instant messaging technologies to online social networks. Other acquisitions earlier this year include Lightningcast Inc. in May and Truveo Inc. in January.