AOL swings to profit in third quarter on higher ad sales

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Tim Armstrong

AOL Inc., the publisher of the Huffington Post and TechCrunch websites, swung to a third- quarter profit on stronger advertising sales.

Net income totaled $20.8 million, or 22 cents a share, compared with a loss of $2.6 million, or 2 cents, a year earlier, the New York-based company said today in a statement. Excluding some items, profit was 34 cents, beating the 29-cent average of analysts’ estimates compiled by Bloomberg.

Since separating from Time Warner Inc. in 2009 Chief Executive Officer Tim Armstrong has worked to transform AOL from an Internet services provider into ad-based content company. Global advertising rose 7 percent to $340 million in the quarter, AOL said.

AOL advanced 3 percent to $36.90 at 8:19 a.m. in New York. The stock has more than doubled this year, outperforming Yahoo Inc., Google Inc. and Apple Inc.

Total revenue was unchanged at $531.7 million, the first quarter since the spinoff that AOL didn’t post a year-over-year decline. Analysts projected $522 million, the average of estimates compiled by Bloomberg.

Search advertising increased 7.9 percent to $91.8 million, according to the statement. AOL’s advertising network surged 18 percent to $112.8 million. Display advertising fell 1 percent to $135.4 million. International display ads advanced 18 percent, offsetting a 2.6 percent drop in the U.S. portion.

AOL’s U.S. advertising business ranks fifth among major competitors behind Google, Yahoo, Facebook Inc. and Microsoft Corp., according to research firm EMarketer Inc.

Patch Readership

The company is going through a lengthy turnaround phase and continues to see lower revenues as its legacy dial-up business loses customers to faster broadband connections offered by cable companies. Sales from dial-up fell 10 percent to $173.5 million.

Armstrong has invested more than $600 million in Web publishing, acquiring the Huffington Post last year for $315 million and spending more than $300 million to develop Patch, a local-news division that Armstrong said should bring in about $50 million in sales this year.

Traffic at its Patch division increased 19 percent in the quarter compared with year earlier, AOL said. Total readership to AOL’s properties grew 4 percent to 111 million people.
 

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