AOL Ad Network Growth Fuels First Revenue Gain in 8 Years

Domestic Display Ad Revenue Continues To Drop

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AOL grew revenue for the first time in eight years in the fourth quarter on strong third-party network and search revenue growth. Revenue rose 4% to about $600 million from $577 million in the same period last year, easily beating analysts' estimates.

Credit: Davod Paul Morris/Bloomberg

The company earned 41 cents a share, which analysts were expecting, compared to 23 cents a share last year.

AOL was up about 7% to $33.50 in pre-market trading.

AOL CEO Tim Armstrong said the company is at an "inflection point" and is now transitioning into an "early-stage growth company."

AOL saw big gains in its third-party network business, which grew 31%, as well as in search revenue, which rose 17%. The growth in the third-party network business includes $9.2 million of new revenue from Ad.com Japan, whose revenue was not counted in the same period a year ago.

Still, the core revenue driver for AOL if it's going to continue to call itself a media business first and foremost – display ad revenue -- is not yet showing growth. Overall display revenue was flat year-over-year at about $170 million, and domestic display revenue dropped once again – this time, 3%. Subscription revenue dropped 10% year-over-year but grew quarter over quarter.

One area that didn't live up to expectations in Q4: Patch. Patch did not hit $40 million in revenue in 2012; previously, the company said it was on track to reach between $40 million and $50 million in revenue. Mr. Armstrong blamed Hurricane Sandy's effect on businesses in Patch towns as well as the company's focus on bringing the network of local-news sites to profitability, which AOL says it will reach by Q4 of 2013.

Lastly, the board has approved another $100 million for a stock repurchase, AOL said.

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