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 Adap.tv. (Excluding Adap.tv, 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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