Trading Idea: Short AOL, Long BIDU/SINA/SOHU/NTES

Trading Idea: Short AOL, Long BIDU/SINA/SOHU/NTES

AOL is a dying company.

AOL's dialup service is dying at a rate of a 25%+ drop in customer base each year, and, unlike Yahoo, they have no stakes in anything worthwhile, having sold off ICQ and bebo (no Alibaba, no Yahoo Japan for AOL). AOL's entire business model going forward relies on site traffic to its web properties which are dying a slow death as well. I predict AOL ceases to function as a standalone entity in the next 5 years, dying a slow death over that time frame and merging with another has-been, such as Yahoo, once the situation becomes desperate enough for the both of them.

On the other hand, Google's exit from China bodes well for Baidu, and the rapid increase in internet usage and cultural proclivity towards internet use in China bodes well for Baidu, Sina, Sohu, and Netease over the next 5 years.