Better Than Expected Numbers Push AOL Inc. (NYSE:AOL) Higher
On November 5, 2013 AOL, Inc. (NYSE:AOL) reported better than expected 3Q13 revenue on increased advertising sales. The company reported 6% growth in total revenue during 3Q13 at 561 million compared to 3Q12 and this also beat the consensus estimate of $531.7 million. Ad revenue rose 14% to $386 million, largely attributed to higher display, search and network sales. However revenue from subscriptions fell 7% to $161.6 million.
The growth is also partly attributed to Adap.TV that AOL bought in August, which is an electronic exchange for video advertising. Video advertising commands higher prices compared to other forms of digital advertising and AOL successfully get more advertisers to commit dollars on AOL’s Adap.TV. At its Brand Group that includes TechCrunch and Huffington Post, display ad revenue grew 11%. Growth in ad sales revenue is significant especially when the rival firms like Google Inc. (NASDAQ:GOOG) reported 8% fall in the price that marketers pay when consumers click on their ads and Yahoo! Inc. (NASDAQ:YHOO) reported 7% drop in its display ad pricing during 3Q13.
The group’s adjusted operating income in 3Q13 grew significantly to $11 million before depreciation and amortization compared to a loss of $10 million in 3Q12. However the earnings fell sharply as the challenges continued at Patch, its network of community news websites. The company reported pre-tax restructuring cost of $19 million and an impairment cost of $25 million, related to Patch, slashing income by 90% to $2 million or say, $0.02 a share. However excluding those items, earnings was $0.55 per share in 3Q13 compared to $0.22 in 3Q12.
The investors welcomed the pullback of the money losing local news and information site, Patch.com. In August the company closed about 400 of Patch’s 900 local websites, and cut its workforce by almost 50%, firing about 500 employees. The stock surged 8.52% during Tuesday’s trade and closed at $42.02.