AOL's Armstrong: 'Best Relative Performance In 7 Years'

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Proving the skeptics wrong, Tim Armstrong is delivering on his promise of a revitalized AOL. Despite a challenging advertising market, AOL beat analysts’ revenue expectations for the third quarter on robust ad growth.
 
AOL on Tuesday said third-quarter ad revenue increased 7% to $340 million, while overall revenue was flat at $531.7 million. "We are posting our best relative performance in seven years,” Armstrong, chairman and CEO of AOL, said Tuesday on a conference with analysts.
 
“Advertising revenue is ... growing strongly across many of our investment areas, including video,” Armstrong noted. “Our video revenue was roughly $10 million two years ago, and in 2012, we will do about $100 million in video revenue.”
 
Year-over-year, AOL’s total audience grew by 4% in the third quarter, according to Armstrong.
 
On AOL’s earnings call on Tuesday, Jefferies analyst Brian Pitz said the company was benefitting from “very strong momentum on many key properties from recent events, such as the election on Huffington Post and, more recently, very positive trends on Patch, due to events [related to Hurricane Sandy].”
 
According to Armstrong: “We also have had tremendous mobile growth, and we have 44 million users of our mobile products and services.”
 
Globally, ad revenue grew 7%, which represented AOL’s sixth consecutive quarter of year-over-year growth. The company also reported a 7% year-over-year growth in combined AOL properties display and third-party network revenue, which totaled $248.2 million for the quarter.
 
Specifically, third-party network revenue was up 18% in the third quarter -- AOL’s sixth consecutive quarter of year-over-year growth. Plus, AOL reported 8% year-over-year growth in search and contextual revenue, representing the company’s first quarter of year-over-year growth in over three years.
 
AOL grew Adjusted OIBDA 12% year-over-year, the second consecutive quarter of year-over-year growth, while reducing Adjusted OIBDA expenses excluding traffic acquisition costs, and one-time items.
 
Continuing its long decline, subscription revenue for AOL's dial-up services fell 10% to $173.5 million.

Looking ahead, Armstrong said: “Overall, what you’re going to see is an operational improvement around advertising as we get into 2013.”

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