Published November 06, 2012
AOL Inc reported higher-than-expected revenue and profit on the strongest advertising growth the company has seen in seven years.
AOL said on Tuesday that third-quarter revenue was flat at $531.7 million, ahead of the analysts' average estimate of $521.6 million, according to Thomson Reuters I/B/E/S.
Advertising revenue rose 7 percent to $340 million, while subscription revenue for AOL's dial-up services fell 10 percent to $173.5 million.
Subscription revenue had its lowest rate of decline in six years.
These trends are helping AOL since its turnaround hinges on the success of getting more online advertising dollars and reducing its reliance on the lucrative but moribund dial-up business.
"Things look great," RBC Capital Markets analyst Andre Sequin said. "This company is continuing to make steps in the right direction."
Still, there are troubling signs in the results. Domestic display advertising, where AOL is making a big effort, including with splashy acquisitions such as the Huffington Post, fell 3 percent in the quarter.
Advertising revenue was lifted in part by double-digit growth in international display and third-party network revenue.
Display ads are big, pricey units on Web pages favored by brand advertisers. Third-party network consists of AOL's Ad.com, which helps sell ads across other properties. These types of ads usually command lower prices than display-ad units.
The company, however, has taken a number of steps over the year, including selling some of its patents to Microsoft for $1 billion and returning those proceeds to shareholders.
Net income was $20.8 million, or 22 cents per share, compared with a year-earlier loss of $2.6 million, or 2 cents per share.
AOL's third-quarter EPS of 22 cents was well ahead of analysts' forecast of 17 cents.
(Reporting by Jennifer Saba; Editing by Lisa Von Ahn and Maureen Bavdek)