AOL touts ad rebound, but posts second quarter loss

AOL maintains that it is still on the comeback trail, but delivers a surprise loss.
Written by Larry Dignan, Contributor

AOL on Tuesday touted growth in its global and display advertising business, but still posted a net loss.

The company reported a second quarter net loss of $11.8 million, or 11 cents a share, on revenue of $542.2 million, down 8 percent from a year ago. Wall Street was expecting a profit of 4 cents a share on revenue of $530.4 million.

In a statement, CEO Tim Armstrong said the company made strides in its turnaround efforts. Total ad revenue in the second quarter was $319 million, up 5 percent from a year ago. Domestic display ad revenue was up 16 percent, but international display fell 10 percent. Subscription revenue was $201.3 million, down 23 percent from a year ago.

AOL hung its earnings report on global advertising revenue---including display, search and third party. That revenue tally was up $14.3 million from a year ago.

On a conference call with analysts, Armstrong talked up Project Devil, AOL's new ad platform designed to increase engagement. He said:

In Project Devil, the number of impressions sold grew over 100 percent and engagement metrics continued to improvement. Consumers are spending almost four times as long on a page with Project Devil on it -- 2.5 times longer watching video. Today we have on our sites 11 different campaigns running including premium brands like Coca Cola, Proctor & Gamble, Johnson & Johnson and Kraft.

However, AOL said it is seeing softness in display advertising for the second half of the year.

Youssef Squali, an analyst at Jefferies, said the quarter was a mixed bag at best. His key points:

  • Revenue was better than expected.
  • Domestic owned and operated revenue was up 16 percent year over year, but part of that was the Huffington Post acquisition. Organic growth is the figure that needs to be watched.
  • Access revenue was better than expectations.
  • The investment in Patch hampers gross margins.

As for traffic, AOL properties are flat compared to a year ago.

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