AOL Reports Strong Ad Revs, But Subscription Revs Dip

Overshadowed by its agreement to buy for $405 million, AOL also reported strong second-quarter revenue on Wednesday. Beating analysts’ expectations, better advertising trends drove revenue of $541 million, which was up 2% year-over-year.

“AOL’s continuing to move forward … with another quarter of solid results and growth,” AOL CEO Tim Armstrong said on an earnings call Wednesday morning. “The company is healthier, leaner, and more focused today than it was a year ago.”

AOL saw 3% and 19% growth in domestic and international display revenue, respectively, which it attributed to increased reserved impressions sold across its various properties.



A weak spot for AOL last quarter, Third Party Network revenue was up 9% year-over-year, thanks to growth in premium formats sold across the network.

Also of note, AOL saw 8% growth in global search revenue driven primarily by an increase in revenue per search on Overall, AOL Networks revenue increased 5% year-over-year, driven by growth in Third Party Network revenue.

Yet, AOL Network’s year-over-year revenue comparison was negatively impacted by the absence of revenue from the divestiture of StudioNow in the first quarter of the year.

According to AOL, StudioNow contributed $3.2 million in revenue to AOL Networks in the second quarter of last year.

To a lesser extent, AOL said the networks' revenue growth was impacted by a decline in revenue from the sale of Brand Group and Membership Group inventory through AOL Networks, as more of that inventory was sold on a reserved basis than in the second quarter of last year.

AOL’s second-quarter operating income came in at $1.04 billion, while net income was $970 million, which the company says was partially impacted by a patent transaction with Microsoft.

Cost of revenues increased $3.7 million year-over-year, which was driven by a 17% increase in traffic acquisition costs resulting from growth in search marketing related expenses.

Continuing a long trend for AOL, subscription revenue declined 5% year-over-year, and domestic AOL-brand access subscriber monthly average churn was 1.4% in the second quarter of 2013 compared to a 13% decline year-over-year in subscription revenue, and 1.7% monthly average churn in the second quarter of 2012.

Going forward, Armstrong on Wednesday said AOL will continue to pursue three core strategies: “Innovating and investing against a concise set of growth brands and platforms;” “actively allocating our recourses and reducing our costs;” and “organically growing and acquiring passionate talent to build differentiated and quality platforms.”

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