AOL Profit Doubles, Ad Sales Decline

By Cindy Waxer November 03, 2010

Thanks to gains from asset sales this quarter, AOL’s third-quarter earnings more than doubled, though revenue declined sharply as its online ad sales dropped and the company’s subscriber base continues to dwindle.

AOL’s net income increased to $171.6 million, or $1.60 per share, in the July-September quarter, up from $74 million, or 70 cents per share, a year earlier. The company’s revenue dropped 26 percent to $563.5 million from $763.9 million. And advertising revenue dropped 27 percent to $292.8 million.

AOL’s subscriber base has also been hard hit. Subscription revenue declines primarily reflect the 24 percent decline in domestic AOL-brand access subscribers. Monthly average churn for the period was 2.6 percent, as compared to 3.3 percent in the prior year period. What’s more, average revenue per user declined 2 percent year-over-year. And revenue from AOL's dial-up Internet business declined 26 percent to $244.8 million. At the end of the quarter, the dial-up division had 4.1 million subscribers — a drop of 24 percent from last year.

Nevertheless, Tim Armstrong, chairman and CEO of AOL, reassured shareholders in a press release that "AOL is working hard to redefine the consumer experience on the internet. In 3Q, AOL continued on the path toward better health through targeted acquisitions and smart dispositions, meaningful product improvements, site relaunches and strategic partnerships, all of which will enable us to execute more quickly against our strategy."

These acquisitions include the recent purchase of 5 Minutes Ltd., TechCrunch, Inc. and Thing Labs, Inc., for $97.1 million and a further $23.1 million in compensation contingent on service to AOL over the next three years. In October, AOL entered into a definitive agreement to sell a portion of its campus in Dulles, Va., for $144.5 million in cash. AOL also renewed and expanded its global partnership with Google for the provision of search services to AOL Properties. AOL and Google agreed to work to expand the partnership to include mobile search and Google will feature AOL content on YouTube. 




Edited by Tammy Wolf

TechZone360 Contributing Editor

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