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AOL gets 45% boost in Iridian Asset Management

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Iridian’s holdings in AOL

Iridian Asset Management’s position in AOL Inc. (AOL) increased by 45%, according to Iridian’s recent 13G filing in January. Iridian upped AOL shares from 5,075,812 to 7,369,542. The filing also revealed that Iridian has a 9.5% passive stake in AOL.

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AOL: A company overview

AOL Inc. (AOL) is a web services company with a global audience and a broad range of offerings and brands. Its business spans online services, products, and content offered to advertisers, publishers, and consumers. The company’s business operations revolve around third-party network and AOL properties.

AOL automates ad sales with a soar in programmatic advertising

AOL has been automating its ad sales, which has resulted in a soar in programmatic advertising. This involves using big-data analysis, crunching numbers, and automating in a precise manner for selling and targeting advertising.

The research firm eMarketer reportedly mentioned there would be a spike of roughly 137% in the market for programmatic advertising in the United States. This is estimated to be about $10 billion in value and is expected to exceed $20 billion in 2016. AOL attributed the boost to the portion of the company’s ad sales made by machines and to the purchase of Adap.tv, a web video company that utilizes computer software for matching video ad sellers and buyers.

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AOL’s strong 3Q14 financial performance

Reporting a double-digit growth in 3Q14 revenues, AOL delivered a seventh consecutive quarter of growth in adjusted operating income before depreciation and amortization (or OIBDA) and revenue. AOL also repurchased approximately 1 million common-stock shares.

Strong performance by AOL’s consumer brand segments

AOL’s membership churn was 1.4%, which is among the lowest rate in years. The Huffington Post exceeded 100 million unique visitors across multiple platforms and has grown into a globally renowned media brand. Native ads on the Huffington Post grew at 100% and are becoming a major catalyst for domestic revenues. TechCrunch grew 18% quarter-on-quarter. Engadget witnessed a 30% growth in its cross-platform users.

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Multiscreen advertising campaigns, a key trend

Half of AOL’s advertising campaigns in 3Q14 were multiscreen, which underscores a key emerging trend. Multiscreen attribution tends to be a major goal of brands and advertisers. The company’s new range of multiscreen formats tends to be fully functional across tablet, mobile, and desktop displays and ensures that consumers are able to interact with the content of the brand anywhere. The cross-device recognition advertisement solutions that AOL launched reportedly have the highest accuracy within the industry, amounting to 93% match rate.

New and growing linear TV business

AOL’s linear TV business is new and small, but it’s experiencing rapid growth and offers a tremendous opportunity for the company and its partners. AOL added ten new clients to its linear TV product during 3Q14.

Iridian Asset Management’s 13G positions

According to its 13G filing, Iridian Asset Management didn’t initiate any new positions.

The fund increased its holdings in the following companies:

  • Myriad Genetics, Inc. (MYGN)
  • Service Corporation International/US (SCI)
  • Avis Budget Group, Inc. (CAR)
  • Omnicare, Inc. (OCR)
  • Halozyme Therapeutics Inc. (HALO)
  • Theravance Inc. (THRX)
  • AOL Inc. (AOL)
  • Lexmark International, Inc. (LXK)
  • The Valspar Corporation (VAL)
  • W.R. Grace and Company (GRA)
  • Sealed Air Corp. (SEE)
  • Pitney Bowes Inc. (PBI)
  • Graphic Packaging Holding Company (GPK)
  • SemGroup Corporation (SEMG)

A significant aspect of the fund’s 13G filings is that Iridian Asset Management dropped the following two key positions:

  • Dresser-Rand Group, Inc. (DRC)
  • Wyndham Worldwide Corporation (WYN)

In the next part of this series, we’ll discuss Iridian Asset Management’s position in Lexmark International, Inc. (LXK).

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