Peter Kafka

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AOL’s Earnings Are Light, but Revenue and Ad Sales Are on Track

tim_armstrong_aolThis looks like a pretty good performance from AOL: Tim Armstrong’s Internet company came in a couple pennies light on earnings in its Q1, but hit its revenue marks.

As important: Its underlying numbers look pretty good.

AOL earned 32 cents a share on revenue of $538 million; the Street was looking for 34 cents and $534 million.

We’ll see what investors make of that, but I assume they’ll be heartened by the fact that AOL ad sales are up 9 percent across the board, and that domestic display ads, a bugaboo for Armstrong in the past, are up 6 percent.

(Update: AOL points out that Firstcall had its earnings pegged at 32 cents, which would mean its numbers were in line; I’ve also seen estimates that pegged earnings above 35 cents. There’s a whole lot less science to this than people like to let on. In any case, the Street doesn’t like something about this quarter, and has pushed AOL shares down 10 percent this morning.)

Here’s AOL’s description of that jump: “Domestic display revenue growth reflects an increase in AOL Properties impressions sold, including video and mobile inventory, and improved reserved pricing related to the sales of video and other premium formats.”

AOL still — still! — makes all of its profits from its subscription business, which is both mind-boggling and not news. That unit threw off $146 million in operating income last quarter. The company’s “brand” business — that is, its ad business — lost $4.9 million.

That’s better than the $16.8 million it lost a year ago. AOL said it would have been better, but that it has been plowing money into Patch, its controversial local play, as well as “editorial and engineering staff at our core brands and in our sales force domestically and internationally.”

AOL Q2 Ad Revenue


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Just as the atom bomb was the weapon that was supposed to render war obsolete, the Internet seems like capitalism’s ultimate feat of self-destructive genius, an economic doomsday device rendering it impossible for anyone to ever make a profit off anything again. It’s especially hopeless for those whose work is easily digitized and accessed free of charge.

— Author Tim Kreider on not getting paid for one’s work