AOL In Low-Key Return To China With “Makers”

AOL in low-key re-entry to China

Quite a lot has happened in the last 2 decades for AOL (NYSE: AOL), which went from online start-up, to Internet superstar, to global media giant and back to its current form of humble Internet player during that time. At the pinnacle of its success following its merger with Time Warner (NYSE: TWX), the company made a splash into China more than a decade ago through a highly-hyped Internet joint venture with PC giant Lenovo (HKEx: 992). That venture ultimately failed miserably, but now AOL is finally making a second move into the market through a new partnership with a local media player.

AOL is being much lower key about its second attempt to crack the China market, in sharp contrast to its Lenovo tie-up in 2001. The headline for this latest move doesn’t even include the company’s own name, saying simply that “Makers Launches in China”. (company announcement) I’ll admit that I’m unfamiliar with this particular project, and only read the press release because China was mentioned in the headline. It was then that I saw that Makers is a digital video project product developed by AOL, which is bringing the service to China in partnership with privately owned Sun Media.

According to the announcement, Makers’ move into China marks the project’s first expansion outside the US. The project is clearly targeting a female audience, acting as a platform for successful women to tell their stories. The China edition of the project has quite a strong line-up of 10 women from various sectors, including Dong Mingzhu, chairman of appliance maker Gree (Shenzhen: 000651); Fu Ying, a Chinese vice foreign minister; and Laura Cha, the first woman deputy vice chair of the China Securities Regulatory Commission.

Based on the announcement, it looks like the decision to bring this relatively modest AOL endeavor to China was largely the initiative of Sun Media, whose founder Yang Lan is also a broadcast journalist. The project itself will probably have relatively limited appeal, since it focuses less on celebrities that usually attract larger audiences and is more aimed at spotlighting accomplished women leaders from the business, government and cultural sectors.

As a longtime watcher of the Chinese media scene, I can say the humbleness of this particular initiative seems particularly appropriate for AOL. I started covering the company in China shortly after it announced its landmark $200 million joint venture with Lenovo in 2001, and watched as that Internet service tie-up slowly crumbled and died a quiet death a couple of years later.

Since then AOL has hinted several times that it might return to China, even as the company’s luster rapidly faded and it was eventually spun off from Time Warner to become its own stand-alone Internet company. Today AOL has a market value of just over $3 billion, or a tiny fraction of the nearly $60 billion for Time Warner. Its name is rarely mentioned among the big Internet companies, though it continues to command a certain level of respect.

So, what do I think of this particular vehicle for the company’s long-awaited return to China? In many ways, this kind of entry seems appropriately low-key and Sun Media could become a much more suitable long-term partner if AOL wants to do more in the market. Like AOL, Sun is a media company that had big aspirations that it never quite achieved as it got passed by newer, more nimble private sector players. Also like AOL, Sun is still relatively well respected and could have the necessary connections to help AOL succeed in the market. We’ll have to wait and see how this partnership evolves, but perhaps this new more modest endeavor could become the starting point for a longer, more fruitful move into China by AOL.

Bottom line: AOL’s new move into China looks like a smart, low-key entry to the market with a suitable partner that could lay the foundation for a longer-term Chinese presence.

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