AOL's Ad-Tech Business Returns to Profitability, But Stock Takes a Hit

Company Says 2015 Will Be an Investment Year

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AOL's ad-tech business was profitable in the fourth quarter, following three quarters of lagging results, the company announced in its earnings release today.

Earnings for the AOL Platforms unit more than doubled to $13.5 million during the fourth quarter, while revenue grew 20%, compared to the same quarter a year ago. The group took in more than $1 billion in revenue for the full year. Almost half of online display ads on AOL websites are now sold through automation.

"We believe, long term, the Platforms business is going to be a significant growth driver for the company," said AOL CEO Tim Armstrong in a call with investors this morning.

Revenue increased 5% during the quarter to $710.3 million, missing projections for $721.9 million. The company's stock tumbled as much as 9% after Mr. Armstrong said the company will spend money and winnow brands this year in a bid to make the company more competitive.

This year "is going to be investment mode," Mr. Armstrong said in an interview on Bloomberg Television, after the company reported fourth-quarter profit that topped analysts' estimates. AOL will focus on popular names like its TechCrunch title and expand those globally, he said.

Last month, AOL laid off about 150 employees, mostly from the sales division, because automated advertising requires fewer salespeople, according to a person familiar with the company's plans. The layoffs will affect AOL's revenue in the first half, the company said Wednesday. AOL had about 5,000 employees worldwide at the end of 2013.

The company's ad-tech leadership also recently assumed more prominent leadership roles. Most notable among them is Bob Lord, formerly CEO of AOL Platforms, who was promoted to AOL president, where he will oversee the company's entire advertising operation.

--With contributions from Bloomberg News--