AOL Earnings Solid as Company Tries to Reinvent Itself | Adweek AOL Earnings Solid as Company Tries to Reinvent Itself | Adweek
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AOL Earnings Solid as Company Tries to Reinvent Itself

Advertising sees growth, but investors question reliance on dial-up

AOL posted solid first-quarter earnings today as it continues its turnaround. The media company's brand business is on somewhat shaky footing as AOL continues to profit mostly from a declining dial-up platform.

Overall revenue was up 2 percent at $539 million, beating Wall Street analysts' expectations. Earnings per share were right on target at $0.32, up 45 percent from a year ago.

Though AOL reported a 9 percent increase in advertising, its stock tumbled, as AOL generated most of its revenue in the quarter through dial-up subscriptions—and investors worry that the company is relying on its increasingly obsolescent legacy business.

"The core issue with this company is can they make content profitable?" analyst Ben Schachter told Reuters.

For the past several years, AOL has worked to reinvent itself as a media company, with acquisitions like The Huffington Post, Engadget, Patch and TechCrunch. Expanding the audience for news sites and generating content has proven expensive; the company reported an operating loss of almost $5 million from its media properties. This is an improvement from the $16.8 million loss reported a year ago, showing that the company is turning around, if slowly.

One bright spot was display ad growth. Revenue from AOL's media sites increased 14 percent to $189.6 million, on the basis of ad sales. Display ad sales went up 6 percent to 140.4 million. This is particularly striking as competitor Yahoo reported an 11 percent loss in display ad revenue.

The display sector is still dominated by Google and Facebook, but AOL took a healthy 3.1 percent of the market. AOL achieved this growth by improving ad tech and placing a stronger emphasis on rich-media advertising. The company is focusing on branded digital content; last week the company released 15 new video programs and struck a deal with FreeWheel and MediaOcean for multi-screen ad buys.

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