AOL profit slump
May 8, 2014
AOL’s stock dropped more than 20 per cent after the company reported that, while revenue was up 8 per cent in the first quarter, net income fell 64 per cent because of restructuring and other charges. AOL said that its profit dropped to $9.3 million, from $25.9 million a year earlier.
Tim Armstrong, the chief executive, said Wall Street was not seeing the “silver lining” in the earnings numbers. He said that the company’s strategy of becoming a leader in mechanised ad sales was in fact already paying off and that it would be a billion-dollar business by the end of the year.
As part of this strategy, AOL announced this week that it had bought Convertro, which analyses user purchasing data to better target ads, for $100 million. Last year, AOL bought Adap.tv, a video advertising sales company.
Armstrong said the company had missed earnings because it was forced to take “a whole bunch of one-time charges” including one from “a cleanup from the Patch partnership.” Patch is the hyperlocal news service that Armstrong championed until its losses became too steep.
The company reported revenue for the quarter of $583 million, up from $538 million a year earlier. That surpassed analyst expectations of $578 million in revenue, and it was AOL’s fifth consecutive quarter of growth. That was driven largely by a 55 per cent increase in third-party advertising.