Twitter should buy AOL

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AOL, America Online Trial CD
America Online version 5.0 500 Hours Free Trial Internet Service Compact Disc. America Online is today AOL, Inc
AOL, America Online Trial CD
America Online version 5.0 500 Hours Free Trial Internet Service Compact Disc. America Online is today AOL, Inc

AOL (NYSE:AOL) still has a lot of aces up its sleeve. In fact, believe it or not, in this age of cable and satellite as well as mobile data technology, a large chunk of AOL’s revenue still comes from dial-up. I know you are probably rubbing your eyes after reading that sentence, but that is the truth. There are still parts of the United States where dial-up is still a viable option for getting on the internet. In many cases, these people are on dial-up not because they want to. It is because it is the only game in town.

Regardless, the window of opportunity for AOL is fast closing. It needs to get a move on its evolution. Is it going to be a content company? Then it better start hitting home runs on its content acquisitions. So far, it appears that AOL is showing the same types of problems that Yahoo (NASDAQ:YHOO)  historically had with its acquisitions. Chalk it up to bureaucratic infighting, clumsy management, or just lame purchasing decisions. AOL hasn’t created a seamless and highly profitable fit with its acquisitions.

With that said, I personally think that AOL needs more technology firepower. If it wants its stock to blow up and its long-term prospects to become more secure, it has to go back to its technology roots. You have to understand that AOL used to be worth hundreds of dollars per share because of the fact that it was viewed as a technology company. Now that it is rebranding itself as a content technology company, a lot of the previous firepower it had have simply evaporated. It needs to recapture some of that sexiness back by acquiring a company that can give it that tech buzz.

A lot of digital ink has been spilled on talks of AOL and Yahoo merging. I think the better merger would be between AOL and Twitter (NYSE:TWTR). Twitter should swallow up AOL. Let’s face it, Twitter doesn’t really have much in terms of long-term prospects. Sure, it is generating a lot of sales now and it is making billions in revenues. The problem is that Twitter is a one-trick pony. Everybody knows this. This is what is holding Twitter back.

AOL, on the other hand, is a content powerhouse. It needs content networks. Twitter is a viral content network. Put these two together, along with Twitter’s ability to milk revenue from its operations as well as AOL’s ability to recruit advertisers. This can lead to a very powerful combination. In fact, it can be a very vertically-integrated operation.

 

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