Peter Kafka

Recent Posts by Peter Kafka

AOL’s Ad Dollars Finally Rise, But Stock Tanks

It took Tim Armstrong a couple years, but he has finally delivered: AOL’s ad sales have increased for the first time since the former Google salesman took over the company.

AOL posted a five percent ad increase for the June quarter, and did much better with its key display-ad category, notching a 14 percent increase. That follows a four percent increase in display ads the previous quarter, when the company first showed signs of life.

Which makes it even odder for Armstrong to have swapped out his top sales guy last month, but we can come back to that later.

For now: The sales bump still didn’t allow Armstrong to record a profit. AOL’s subscription revenue continues to dwindle away (though more than three million people are still paying it to connect to the Internet) and the company is continuing to plow money into initiatives like its Patch local play. So AOL posted a net loss of $11.8 million and an operating loss of $5.8 million on revenues of $542 million.

In its earnings release, AOL took pains to point out that it was benefiting from the acquisition spree it went on during — and which culminated in — the $315 million Huffington Post deal earlier this year.

The company said its network ad business grew 29 percent, and that half of that increase was due to its purchases of 5min and goviral, two video ad start-ups. And AOL said premium display ad revenue had increased 18 percent, “a portion of which is attributable to our acquisitions of The Huffington Post and TechCrunch.”

So far, Wall Street is profoundly unimpressed with the results: AOL shares were down by more than 15 percent in the first hour of trading today, even as the broader market ticked up after a brutal couple days.

In a brief interview following the company’s earnings call, I asked Armstrong why he thought the market was punishing him, and he said he hadn’t been watching the ticker this morning.

But if AOL’s performance didn’t mirror the overall market, he said, “that would be hard to comprehend, based on the fact that we pretty much have turned the company into a growth company in the past two years.”


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— Valleywag editor Sam Biddle