November 3, 2010

AOL Revenue Drops Due To Advertising Sales

AOL Inc. reported a 26 percent decrease in its quarterly revenue because of steep declines in search and display advertising.

Chief Executive Tim Armstrong said Wednesday that he expects growth could return next year though.

"I would hope AOL is growing at industry advertising rates at the second half of 2011," he said on a conference call with analysts.

Armstrong has been trying to turn around the company into a media and entertainment powerhouse.

AOL's third-quarter profit rose higher than expected, but it still struggled to boost its ad revenue throughout the year.

"The market reaction is a little surprising to me," Clayton Moran, an analyst with the Benchmark Co, told Reuters. "(There) is still evidence of meaningful decline in the business and it wasn't significantly better than prior projections.

"I think it's a little bit aggressive to give AOL the benefit of the doubt at this point in time," Moran said.

The drop in revenue suggests the company will need to attract advertisers willing to spend big on the website.  Advertising revenue dropped 27 percent, $292.8 million, in search, display and third-party ads.

AOL's revenue fell $563.5 million overall, while its subscription revenue dropped 26 percent to $244.8 million.

AOL has introduced a redesigned home page where video plays a key role.  The company also released a new platform called Project Devil that incorporates bigger cleaner ad formats into the site.

AOL's income rose to $171.6 million, compared to its income a year prior of $74 million.