Third Quarter Report Shows Mixed Results for AOL (NYSE:AOL)

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By Hanson So on November 6, 2014 Company

This morning, third quarter report presented by AOL (NYSE:AOL) showed mixed result. AOL, which is the owner of TechCrunch, was able to surpass sales estimates but did a breakeven on the earnings, whereas its operating income (OIBDA) could not meet the desired target. With Google dominating the market, AOL (NYSE:AOL) is actively pursuing a complete revamp strategy on the basis of assured advertisement technology.

As per the report, advertisement technology business known as AOL Platforms is the only division where revenues went up by 44% as compared to last year. Sales revenue came out to be $626.8 million with earnings per share $0.52 and OIBDA $121.8 million. Whereas, analysts estimates were $623 sales revenue, earnings per share $0.52 and OIBDA $125 million. A minor decline is reported on display sales on AOL properties from $141.9 million last year to $141.9 million. AOL attributes it to shortfall of $10 million in sales revenue because of “shuttered brands” including Patch, AOL’s (NYSE:AOL) unsuccessful advertisement network which ultimately spun out to Hale Global this January. If we don’t take this factor in to consideration, the other AOL’s businesses registered a growth of 7%. However, there is a 3% increase to $97.9 million in Search ads on AOL.

AOL Chairman and CEO, Tim Armstrong, was quite satisfied. He stated that AOL (NYSE:AOL) has been able to maintain its positive growth in third quarter in the areas of consumer traffic, revenue generation and profitability. He further highlighted that AOL has been placed right in the middle of unsettling transformation, occurring in culture and code both online and offline, because of its dominance in world-wide contents, video, mobile and ads.

AOL Platforms is still contributing highest revenues for the company. This year the division earned revenues of $271.9 million registering a substantial 44% increase. Whereas, Membership group became the second highest earning division providing $196.7 million in revenues despite showing a decline of 4% as compared to previous year. The complete dial-up revenue despite living in broadband and mobile internet world is also a part of Membership group. Moreover, the revenues of Brand Group showed a negative growth of 3%, down from $192.5 million in 2013 Q3 to $187.3 million in 2014 Q3.

According to the data given by EMarketer, global digital advertisement market was 120 billion in 2013 and AOL (NYSE:AOL) was able to just capture 0.9% share. It predicted that in 2014 worldwide expenses on digital advertisement would rise to $140.7 billion and AOL would hold on to the same market share.

Recent information has revealed that executives have formalized the strategy to close some of AOL properties which are the main cause behind reporting flat display revenue by AOL (NYSE:AOL). AOL CFO, Karen Dykstra, expressed her resolve that the management would be concentrating more on global brands with greater values so as to really make a substantial difference in mobile. Their main aim will be to ultimately get higher revenues and profits in that particular brand group.