Revenues at AOL fell by 26 per cent in the third quarter, hit by sharp declines in advertising and subscription sales.
However, the internet group saw its net income more than double as a result of gains from disposals made by chief executive Tim Armstrong, as part of his strategy to reshape the company from an internet access business to a provider of specialised digital content.
|Sales||Net profit||Earnings per share||Dividend|
|↓ 26%||↑ 132%||↑ 129%||-|
Total revenue in the three months to September 30 fell 26 per cent to $563.5m, compared to $763.9m in the same period a year ago, hit by a 27 per cent drop in advertising sales and a 26 per cent fall in subscription revenues.
Of the fall in advertising revenue, AOL said that $62.3m related to a range of “AOL-implemented initiatives”, including lower third party network revenue associated with European shutdowns, the absence of Bebo revenue, and fewer queries in Germany and France where the company has reduced operations.
Search and contextual advertising revenue fell 28 per cent to $99.2m, from $138.4m a year ago, while domestic display revenue fell 8 per cent to $112.5m ($121.8m).
In spite of the revenue slump, net income jumped 132 per cent to $171.6m, or $1.60 a share, from $74m or 70 cents per share a year ago, thanks to asset sales.
AOL sold instant messaging service ICQ in April for $187.5m, less than half of the $400m it paid for it in 1998. In June it sold Bebo, the social networking site it bought for $850m in 2008, reportedly for less than $10m.
Offering some solace for investors, Mr Armstrong, a former Google advertising chief, said he hoped AOL’s advertising would be growing in line with the industry by the second half of next year.
“I would hope AOL is growing at industry advertising rates at the second half of 2011,” he said in a conference call.
AOL was spun-off from Time Warner in December 2009. In September, the company invested a combined $97.1m on three acquisitions: TechCrunch, a blog with nearly 4m monthly readers, Thing Labs, the maker of a social networking aggregator, and 5 Minutes, a video distribution site.
AOL said it would pay a further $23.1m to certain employees of the acquired companies in compensation for service over the next three years.
The company said it had cash of $623.3m at September 30. Cash provided by continuing operations in the third quarter was $165m, down 2.5 per cent year on year, while free cash flow was $130.8m, up 4.4 per cent year on year.
Shares in AOL rose 5.7 per cent, or $1.44, to $26.73 in morning trade on Wednesday.