AOL Market Value Drops More than 25% Despite Great Product Launches

Although Aol reported advertising revenue growth in Q2 and narrowed its net losses compared to Q2 2010, its market value had dropped 26% today at press time.

Aol hasn’t had a single breakout product since Tim Armstrong took over as CEO in 2009, but the company has has had two significant product launches in AIM AV and Editions and has continued to attract talented people to its team.

Aol’s AIM AV is the company’s latest dive into video chat. Best part: users do not need to sign up or register for the service to use it.

Editions (see screen shot below) is a customizable iPad magazine that pulls content based on what your social network is recommending, your location and what you read, and delivers it daily. Aol-owned content appears in its entirety. The app competes with Zite, Flipboard and Pulse but is aimed at baby boomers.

“It's well designed and borrows a few elements from its rivals to form a solid, if not truly remarkable, app that's worth consideration,” said Jeffrey Wilson of PC Magazine.

In terms of hires, last year the company brought in Jason Shellen, former manager of new business for Google and member of Pyra Labs, to head up AIM products.

To head its mobile division the company added David Temkin, former VP of development for Palm and founder of Lazlo. Sol Lipman, the co-founder of Rally Up and 12Seconds, became senior director of mobile projects last year.

The Q2 report revealed that total revenues were down 8% at $542.2M, but advertising revenue had increased for the first time since 2008, up 5% over Q2 2010 to $319M.

Entrepreneur and angel investor Kevin Rose tweeted, "AOL down 28% today w/a 1.15B cap, given they own TC and Huffpo (which has more traffic than NYTimes) I'm bullish on them, might b a good buy."

We expect that when Aol drops to a $1B market cap, it will be purchased by Yahoo or Newscorp., both of which covet display advertising, video, the Huffington Post and most of all Tim Armstrong's sales leadership.