AOL Profits Dip, While Third-Party Revs Soar

Higher costs sent second-quarter profits down 1%, AOL said Wednesday, but the company’s ad technology business continued to shine -- contributing to a 20% increase in global ad revenue.

During the period, third-party platform revenue soared by 60%, which AOL attributed to growth in the sale of premium formats across its programmatic platform and the inclusion of revenue from (Excluding, Third Party Platform Revenue grew approximately 20%.)

The second quarter was “a great example of our ecosystem showing growth driven by the future of media technology,” Tim Armstrong, AOL Chairman and CEO, told analysts on a Wednesday conference call.

Driven by positive programmatic advertising trends, total revenue rose 12% year-over-year to just over $606 million, during the second quarter.

“We continue to believe that moving AOL into the center of the mechanization of the global media and advertising business, we’ll offer … a differentiating and exciting opportunity to grow,” Armstrong said.

The company also saw 6% growth in search revenue driven by increased queries from search marketing related efforts (which came with approximately $18 million of increased Traffic Acquisition Costs (TAC).

Patch -- Tim Armstrong’s biggest management misstep to date -- continues to haunt AOL. The company blamed a 1% decline in AOL Properties display revenue on the absence of about $15 million in revenue from “shuttered or de-emphasized brands,” i.e., Patch.

The failed hyper-local media network also led to an annual decline in revenue for AOL’s Brand Group. Excluding the impact of Patch, Brand Group display revenue grew 4%, which AOL attributed to continued growth in inventory pricing.

Brand Group search revenue grew 10% year-over-year, driven by increased queries from search marketing related efforts.

Subscription revenue declined 7% year-over-year as 4% growth in average monthly subscription revenue per AOL subscriber partially offset a 9% decline in subscribers.

As of June, AOL said it had $136 million in cash and equivalents, and $105 million of outstanding borrowings under its $250 million senior secured revolving credit facility agreement.

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