AOL Ad Revenue Up for Fifth Straight Quarter

Domestic display flat, total revenue beats estimates

Maybe AOL should engage in proxy fights with activist investors more often. In the same quarter that the company grappled with Starboard Value over the makeup of AOL’s board and standing of its Patch business, AOL returned “the lowest decline in revenue in seven years,” CEO Tim Armstrong said during a second-quarter earnings call this morning. As Armstrong noted, while overall revenue was still down—dipping 2 percent year over year to $531.1 million, but beating Wall Street projections—global advertising revenue continued an upward trend, and AOL showed it may have begun to stanch the bleeding from its dead-weight subscription business.

Global advertising revenue—63 percent of AOL’s business—saw its fifth straight quarter of growth, this time rising 6 percent year over year to $337.8 million. The company’s third-party advertising network, comprised primarily of its business, jumped by 19 percent year over year to $111.4 million to fuel much of that growth. AOL properties received on average 112 million domestic monthly unique visitors, a 1 percent decline. But average domestic monthly uniques to the AOL Advertising Network grew by 2 percent to 186 million visitors. 

Armstrong said AOL’s advertising business has been helped by the fact that advertisers are looking at display advertising more rationally. “People are starting to look across the spectrum at how properties convert…People are zeroed in on the places they’re getting results from,” Armstrong said. He said later during the call, “Our approach to the marketplace last year got into a non-data-centric approach to the marketplace, a nonverticalized approach, and we have shifted that back.” Brands are interested in premium formats, video and taking deeper looks into the audiences that perform, Armstrong said, adding that nearly 100 percent of the insertion orders AOL receives from media buyers include mobile and video, whereas last year that rate was closer to 75 percent.

The chief executive touched on AOL’s display partnership with Microsoft and Yahoo, saying that the company has increased the amount of its impressions going into the exchange and that the partnership grew by 67 percent from Q1 to Q2, although Armstrong didn’t specify what that growth was related to.

While domestic display revenue flattened at $126.8 million, global display revenue ticked up 2 percent to $139.9 million, thanks to AOL’s international display business, which spiked by 21 percent but still only chipped in $13.1 million. But AOL will take any advertising revenue it can get since search and contextual advertising continue to flag. While not as bad as recent quarters, the segment fell by 1 percent to $86.5 million in Q2. Newly promoted chief operating officer Arthur Minson attributed the decline in part to churn in AOL’s subscription business.

Subscriber churn has hovered in the 2 percent to 3 percent range for the last few years but eased to 1.7 percent in the most recent quarter. Nonetheless the business—which includes not only Internet access but also computer support, private Wi-Fi access, password manager and computer insurance—saw its revenue drop by 13 percent to $175.5 million.

Recommended articles