AOL Profit Rises on Strong Ad Sales

AOL reported its best quarterly revenue growth in eight years because of strong search and advertising sales, and its shares rose sharply.

The company said Friday that total revenue rose 4 percent to nearly $600 million in the fourth quarter, beating analysts’ estimates of $573.7 million, according to Thomson Reuters.

Advertising revenue, an important measurement for the company as it moves away from subscription-based dial-up services and emphasizes its media properties like The Huffington Post and Patch, rose 13 percent to $410.6 million.

It was advertising sold through AOL’s third-party network that helped lift overall revenue. Revenue jumped 37 percent to $183.5 million at AOL Networks, a market to sell inventory on behalf of publishers.

Net income rose to $35.7 million, or 41 cents per share, in the fourth quarter from $22.8 million, or 23 cents per share, a year earlier. Earnings per share were in line with analysts’ estimates.

While advertising sales represent AOL’s future growth, the subscription unit, which is now called the membership group and includes the legacy dial-up service, is still providing the bulk of profit.

Excluding special items, operating income before depreciation and amortization for the membership group was $158.7 million for the quarter, representing the vast majority of the total.

“It’s not great to see so much of the bottom-line contribution coming from the revenue segment in decline,” said Ken Sen, an analyst at Evercore. Mr. Sena said the company has made “steady progress” over the past two years, but “still has a ways to go.”

AOL’s board also authorized the repurchase of $100 million in stock.

Article source: http://www.nytimes.com/2013/02/09/business/aol-profit-rises-on-strong-ad-sales.html?partner=rss&emc=rss