Today at least, Wall Street isn't buying AOL's new video focus — the stock is now trading down more than five percent. And with AOL's stock down 53 percent in the past 12 months Armstrong faces an uphill battle convincing investors that today's strategy could spark a turnaround.
Armstrong has gotten some impressive names on board — who wouldn't want Mark Burnett producing a series — but we'll see if these shows draw eyeballs. One question is whether people can be convinced to watch a new genre of show. Websurfers know exactly what they're getting when they click to an ABC sitcom on Hulu or they watch a cat falling asleep on Youtube. But people haven't been trained to watch "webisodes" in the same way. There's no doubt that people have plenty of time to waste watching video online, but this is still a developing genre of content.
Will the power of brands like Klum, J-Lo and Burnett be enough to draw people looking to read an article on one of AOL's sites, to watch a video? Will it keep them coming back? It's far more expensive to produce web video than articles for the web, but it could yield a much higher reward, depending on how much AOL has to spend to promote the video.
Investors were disappointed by the slow growth of AOL's display ads after the company last reported earnings. In each successive announcement AOL will be facing even tougher scrutiny. So the bar's higher than ever for this video strategy to work. But this time AOL isn't just trying to expand on a proven entity — display ads — it's trying to push online video in a new direction.
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