Bending Spoons CEO Luca Ferrari on AOL acquisition: The company 'holds a lot of promise'

Key Concepts

• Bending Spoons: An Italian tech holding company that acquires digital technology businesses with untapped potential and transforms them through a hands-on approach.
• AOL Acquisition: Bending Spoons' recent acquisition of AOL, a digital business with an email client and web portal.
• Hands-on Approach: Bending Spoons' methodology involving rewriting code, rearchitecting cloud infrastructure, redesigning UI, launching features, optimizing monetization and marketing, and rearchitecting organizations.
• Hybrid Business Model: Bending Spoons is described as a mix of private equity (25%) and a technology company (75%), focusing on operating and holding businesses rather than short-term financial gains.
• Long-term Holding Strategy: Bending Spoons buys businesses to hold and operate them indefinitely, never having sold an acquired company.
• AI Enhancement: The plan to leverage Artificial Intelligence to improve recommendations on AOL's web portal.
• Closing the Gap: The objective to bring AOL's email client to a best-in-class standard.
• Customer Retention and Acquisition: The strategy to improve products to simultaneously retain existing users and attract new ones.
• Acquisition Portfolio: Bending Spoons has acquired over 50 businesses, including Evernote, Brevo, Streamyard, WeTransfer, and recently Vimeo for $1.38 billion.
• Proprietary Technologies and Expertise: Bending Spoons utilizes its platform of technologies, expertise, talent access, and company culture to optimize acquired businesses.
• Business Transformation: The process involves identifying and addressing weaknesses in acquired businesses, whether it's user interface, technological infrastructure, monetization, or cost base.
• Cash Flow Reinvestment: Cash flow generated from acquired businesses is used to strengthen Bending Spoons' platform and fund new acquisitions.

Bending Spoons Acquires AOL: A Strategic Transformation

Introduction to Bending Spoons and its Acquisition Strategy

Bending Spoons, an Italian tech holding company, has acquired AOL, adding it to its portfolio of digital businesses. Luca Ferrari, co-founder and CEO of Bending Spoons, explained the company's unique operational model. Bending Spoons specializes in acquiring digital technology businesses with "untapped potential" and then employs a "very hands-on approach" to transform them. This transformation involves significant technical work, including rewriting codebases, rearchitecting cloud infrastructure, redesigning user interfaces (UI), launching new features, optimizing monetization and marketing strategies, and rearchitecting the organization for improved long-term performance. Ferrari clarified that Bending Spoons is not a traditional private equity fund; it operates with a hybrid model, being approximately 25% private equity and 75% a technology company. They purchase businesses using their own balance sheet with the intention to "hold and operate forever," distinguishing themselves from private equity firms that typically aim for quicker exits. The company's workforce primarily consists of software engineers, researchers, and product designers, reflecting their focus on developing digital products and technologies.

Rationale Behind the AOL Acquisition

Ferrari elaborated on why AOL was an attractive asset for Bending Spoons. Despite AOL's history of changing ownership (Time Warner, Verizon, Oath, Apollo), Bending Spoons sees significant promise in the company. While some might perceive AOL as a "legacy product," it still commands a substantial user base. Currently, AOL's email client and web portal attract approximately 8 million daily users and 30 million monthly users, making it a "top five email product in the western world by usage." Bending Spoons believes that while the existing product is good, it can be significantly improved.

Plans for AOL's Transformation

The core of Bending Spoons' strategy for AOL lies in enhancing both its technology and user experience.

• Web Portal Enhancement: A key initiative is to leverage Artificial Intelligence (AI) to "greatly enhance the quality of recommendations" on the web portal. This aims to make the browsing and content consumption experience "more exciting" and "more interesting," ultimately leading to increased traffic, customer satisfaction, and revenue.
• Email Client Improvement: Regarding the email client, Ferrari acknowledged that a "radical improvement" will likely take "more than a year" due to its technical complexity. However, the goal is to "close the gap" between AOL's email client and "best-in-class" products in the market. This effort is expected to benefit the millions of existing users and contribute to a "healthier, better business down the line."

Balancing Growth and Maintenance

When questioned about whether the focus is on growing the business or simply maintaining it by strengthening existing features like the email client, Ferrari stated that Bending Spoons aims to achieve both. He highlighted that the actions taken to "keep customers happy" are often the same actions that "attract new customers." The strategy involves developing a "good product, an intuitive product, a resilient, powerful product." This approach is expected to improve customer retention, which is already "pretty good" and characterized by a "fairly resilient business" with "quite loyal" customers. Simultaneously, they hope to attract new users who will find AOL appealing and "stick around."

Bending Spoons' Broader Acquisition Strategy and Track Record

The discussion then shifted to Bending Spoons' extensive acquisition history. Since its founding in 2013, the company has been active in acquiring digital businesses. Notable acquisitions include Evernote, Brevo, Streamyard, and WeTransfer. Most recently, Bending Spoons announced the acquisition of the video platform Vimeo for $1.38 billion in September.

Ferrari confirmed that a high-level strategy is applied across all acquisitions: leveraging their "platform of proprietary technologies, expertise, access to talent, company culture" to become the "best operator of digital technology businesses globally." While the core toolkit remains consistent, its application is tailored to each specific business. This involves identifying and addressing the unique strengths and weaknesses of each company. Improvements can range from enhancing the user interface and feature set to overhauling underlying technological infrastructure for better performance and resilience, optimizing monetization, or addressing bloated cost bases.

Long-Term Vision and Financial Model

A crucial aspect of Bending Spoons' strategy is its commitment to long-term ownership. Ferrari emphasized, "We've never sold a business." Having acquired over 50 businesses since its inception, starting with a $10,000 acquisition a decade ago, the company has experienced significant compounding growth. Their intention is to "make them the best businesses they can be with a long-term view." The cash flow generated from these improved businesses is then reinvested to "strengthen our platform and going after new acquisitions." This cyclical model underscores their focus on sustainable growth and value creation through operational excellence rather than short-term financial transactions.