In line with its ambitions to become a platform for live broadcasting and programming, the company also said that it had acquired Adap.tv, a video advertising company that allows purchases across the Internet and on television. The cost was $405 million.
Under the terms of the deal, AOL will pay $322 million in cash and about $83 million in stock. That is more than the $315 million it paid for The Huffington Post two and a half years ago and thus is its biggest acquisition since becoming an independent company.
Video, with its ability to command higher advertising rates, has been one of the biggest points of focus for Internet media companies for some time. AOL has been seeking to amass sources of video content as part of its bet that consumers will increasingly watch video online instead of on television.
“AOL is a leader in online video, and the combination of AOL and Adap.tv will create the leading video platform in the industry,” Tim Armstrong, AOL’s chairman and chief executive, said in a statement. “The Adap.tv founders and team are on a mission to make advertising as easy as e-commerce, and the two companies together will aggressively pursue that vision.”
AOL executives added in a phone interview that the acquisition was not as much about promoting their own content as it was about diversifying the company’s earnings into a revenue stream — the infrastructure for ad purchasing for online video — that it thinks has tremendous potential.
In addition to the Adap.tv sale, AOL trumpeted the fact that its ad sales were up 5 percent. However, that growth was tepid compared to overall digital ad spending in the United States. That spending grew by 14.8 percent, to $10.01 billion, in the second quarter of 2013 compared with the same period last year, according to Emarketer, an online advertising research firm.
Despite positive growth in advertising and traffic, up 3 percent year over year, the earnings revealed the company’s continued dependence on revenue from subscriptions to the AOL portal, a declining business. Looking at adjusted operating income before depreciation and amortization, or income earned from regular operations, the membership business was a net positive at $151.6 million, but still down 4 percent year over year.
Wall Street’s reaction was mixed, and AOL’s stock rose 1.4 percent, to $36.69 at the close of trading. Analysts were pleased that AOL seemed to be cutting losses. The brand groups, for example, cut losses from $15.2 million for the quarter a year earlier to $1.4 million this last quarter. Though losses increased in this area for AOL networks, Mr. Armstrong said that was because the company was in “investment mode.”
But many worried about whether AOL paid too much for the Adap.tv purchase, which will be completed in September.
Adap.tv, founded in 2007, counts Spark Capital, Redpoint Ventures and Gemini Israel Funds among its investors.
This article has been revised to reflect the following correction:
Correction: August 7, 2013
An earlier version of this article misstated the quarterly revenue for AOL. It was $541 million, not $361 million, for an increase of 2 percent, not 7 percent. The error was repeated in an earlier version of the headline.
Article source: http://www.nytimes.com/2013/08/08/business/media/aol-reports-revenue-increase-of-7-percent.html?partner=rss&emc=rss