AOL to Move to New York

AOL made a major announcement today, stating it is moving offices to New York from its current premises in Dulles, VA. The Internet division of Time Warner said it would also combine the different companies it had bought recently with its own company, Advertising.com, and develop a single business platform called Platform A.

This strategic move has been on for a while now, ever since the company announced more than a year ago (13 months, to be precise) its decision to hand over its e-mail and other such subscription-based Internet services and change into an online outfit dependent on advertisements, much like rival companies Yahoo and Microsoft.

This was a bold decision to take, considering the company garnered 75% revenues from its subscription services alone. The company realizes that banking on advertisements alone would not be enough to sustain its business, and has therefore opted to distribute advertisements so they could be placed on websites across the Web.

The market share the four Internet majors – Google, Microsoft, Yahoo, and AOL together have in terms of advertising revenue is 57.4%. AOL, with a market share of 7.5%, is far behind its competitors, with Yahoo accounting for 18% and Google alone accounting for a whopping 25%, or a quarter of the total market share.

As CEO and Chairman of AOL, Randy Falco put it, the company had realized quite early there was a noticeable change in trend in terms of advertising. With the number of websites increasing rapidly, companies were increasingly looking for different ways to put up advertising on the Internet.

One of the main beneficiaries of the shift was the new company floated by AOL, Advertising.com. The company has posted a 30% growth in revenue for the first quarter of fiscal 2007, the quarter ending June 30, 2007.

All Internet majors have resorted to buying advertising companies or networks so they can push their advertisements not just on their sites, but on websites across the Internet. This strategy would also ensure they did not suffer any decline in their revenues. To this end, AOL went on a buying spree of sorts, picking up TACODA, Lightningcast, and Third Screen Media.

The move to New York is also a strategic decision, as AOL’s rival companies all have offices in this city. It also puts it on the same page as major media companies based out of the city.