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AOL Investors Seek Direction On MapQuest

NEW WORK (The Deal) -- When AOL (AOL) reports fourth-quarter earnings on Thursday, investors will look for details from chairman and CEO Tim Armstrong about the company's recent divestiture of local news site Patch.

Investors will also hope for clues about what else AOL could shed as the company focuses on advertising technology and on video ads in particular.

Moves such as the $405 million purchase of video ad company Adap.tv last September reflect the emphasis on advertising technology. Meanwhile, AOL's portfolio of assets and brands includes late-'90s acquisitions such as MapQuest and Moviefone, which may be tangential.

Shareholders received the Patch disposal favorably.

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AOL announced after the bell on Jan. 15 that it would contribute Patch to a joint venture controlled by tech-focused turnaround investor Hale Global. The stock increased 11%, to $52.54, the next day, but has since traded back to about $48.

Cowen & Co. LLC analyst John Blackledge wrote in a Wednesday note that the move "eliminates a distraction" and showed that management "will take the necessary steps to ensure longer term shareholder returns."

MapQuest could have value. The unit operates the No. 2 map website and the No. 3 mobile mapping app. MapQuest recently updated the app for Apple's (AAPL - Get Report) iOS7.

AOL doesn't break out information for MapQuest, but one analyst, who requested anonymity, suggested it could be worth $500 million.

Seth Shafer of SNL Kagan observed that MapQuest has come up as a potential divestiture in recent years. "There is not a lot of advertising crammed into it," he said.

"[Mapquest] is also sort of conspicuously not branded as AOL," he added. "It doesn't seem to fit the model of where they are going with the focus on video advertising."

Advertising is the source of AOL's growth. Cowen & Co. said it expects fourth-quarter advertising revenue to increase 18% to $410 million, with Adap.tv contributing about $50 million in new sales. The firm said it expects AOL to report $2.3 billion in revenue for 2013, an increase of 4.7%.

Shafer noted that AOL has been pushing hard on "programmatic" advertising sales, in which a company or agency could buy advertising for all of its inventory available through a computer interface rather than through a salesperson.

"AOL has really hung their hat on that idea," he said.

Moviefone and MapQuest were acquired before the Time Warner merger, when Bob Pittman and Steve Case ran the Internet company. AOL bought Moviefone for $388 million in stock in 1999. A year later, AOL paid $1.1 billion in stock for MapQuest, which has likely retained more of its value than the movie listing site.

Microsoft (MSFT - Get Report) and Amazon.com (AMZN - Get Report) have at times been viewed as potential suitors for MapQuest.

Microsoft has demonstrated an interest in location-based online media, with a
$15 million investment in FourSquare Labs Inc. in early February.

Amazon's efforts with Kindle tablets and readers could dovetail with mapping applications.

AOL doesn't face pressure to unload an operation like MapQuest at the moment. The business seems to reflect the direction of pre-Time Warner AOL more than that of Armstrong's current team.

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