San Francisco — AOL, which became a publicly traded, autonomous company in December after getting spun off by former parent Time Warner, on Monday said that it has acquired Nashville, Tenn.-based video firm StudioNow, a company that delivers an online platform for creating, storing, and distributing video, for $36.5 million in cash and stock, a move intended at bolstering AOL’s Seed.com for the creation of original content as key to its strategy for boosting its traffic and, consequently, its so-far disappointing online advertising business.
AOL said it paid $36.5 million in cash and stock for the acquisition finalized Friday. The cash will be disbursed over multiple years, AOL said.
Tim Armstrong, chairman and chief executive, said demand for videos is growing enormously among consumers and advertisers. AOL owns 80 sites, offering coverage of topics such as gadgets, sports and politics, and nearly all have an ongoing appetite for such content.
“We have a big need for video,” he said.
StudioNow may also assist AOL to cater to an online video-advertising market expected to reach $45.3 billion by 2014, according to eMarketer.
Privately held StudioNow will also continue offering “a fully functional video creation platform” for Seed.com, its online platform to commercial companies, AOL said in a statement Monday. Its current customers include Simon & Schuster, Maxim magazine, and CitySearch.com.
“Premium original video creation is a fundamental part of AOL’s strategy to offer consumers world-class, stimulating content at scale, and the integration of StudioNow into Seed.com will enable us to increase our video content/offerings significantly,” Armstrong, said in a statement.
Seed.com is a site where AOL purchases and distributes topics around the clock that it wants freelancers to cover with articles, photos and videos, including entertainment, news, sports, lifestyle, technology and finance, which it then pays for and publishes on its Web properties.
Seed.com also allows contributors’ piece of work to be viewed, heard or read on AOL’s more than 80 niche content sites. So far, Seed.com has put out calls for text and photos from its network of professionals.
“StudioNow and AOL share a fervent commitment to high-quality content, services and technology, and that makes us appropriately suited for this new partnership,” said David Mason, co-founder and CEO of StudioNow. “This new chapter for StudioNow presents a tremendous opportunity for our growing professional creative network to reach new audiences, diversify their assignments, and increase their income as the number of projects coming from the numerous AOL properties will create a surge in video assignments.”
While AOL possess the technological capabilities to create its own technology for the Seed.com platform, it decided not to.
“I think there are times to build IT in-house — i.e., Seed.com — and times to progress through an acquisition like StudioNow,” said Caroline Campbell, vice president of AOL corporate communications. “You will see this type of mix from us going forward — build it/buy it — aligned to our strategy and aimed at making the company successful long-term.”
For instance, Seed.com may issue out a call for video footage from Haiti from one of its professionals in the network. The technology will enable the user to push that video footage to Seed.com so that original-format content can be used in video format, according to Campbell.
Armstrong said his company had been hunting for an acquisition that could help it produce more videos to Web surfers. Although the company has production studios in New York, Los Angeles and Dulles, AOL is seeking broader nationwide reach — and quickly.
“We did a search across the video landscape,” he said. “We knew we wanted to buy, versus build, because of the time frame we were looking at.”
“AOL is trying to position itself as a media company, and where media is trying to go on the Web is video,” said Rob Enderle, a tech industry analyst.
StudioNow, founded in 2007 and based in Nashville, Tennessee, employs a network of video editors, most of whom work on a freelance basis, will continue running its existing business for companies. The company’s founder has said his firm can produce videos for corpor
ations at a cost of $3,000, compared with to what was once a typical starting price of $15,000.
While the call for freelance professionals will be open to the masses, AOL said it will be very strict on quality. The entire 17-person team will remain on board and the company will remain in Nashville, Campbell said.
Meanwhile, AOL also announced Monday that its chief technology officer Ted Cahall is stepping down. The company is searching for a replacement. Also emerging out of the AOL camp is news that it has hired Jeff Reynar as head of technology for engineering and products in New York. The co-founder and former CTO of DBT Labs, the company behind a social search service.