AOL is finally starting to emerge from the ashes of its disastrous $100bn merger with Time Warner more than a decade ago, reporting on Friday that it grew overall quarterly revenues for the first time in eight years.
The once-pioneering internet company reported that total fourth-quarter revenues grew 4 per cent compared with a year earlier to $599.5m. Net profits increased 58 per cent to $35.7m, propelled by an asset sale.
AOL shares jumped about 8 per cent on the news in afternoon trading on Friday.
AOL is in the middle of a transformation from its roots as a subscription-based service for connecting to the internet into an ad-funded digital media company. To that end, the company is investing in expanding its online news and commentary site Huffington Post and Patch, a network of local sites, as well as online video offerings and digital advertising technologies.
While AOL’s turnround plan has been met with criticism, AOL shares nearly doubled in 2012, largely thanks to a $1.1bn deal to sell patents to Microsoft and return the entire proceeds to investors.
“We have walked through the valley of the turnaround and gotten to growth,” said Tim Armstrong, AOL’s chief executive who also is the company’s largest individual investor with more than 5 per cent of the shares.
The company still has much to prove before its turnround is seen by analysts and investors as a lasting success. AOL generated about 68 per cent of its revenues from advertising in the quarter but continues to derive almost all of its profits from its shrinking subscription business.
The company’s membership group, which includes its subscription business, posted adjusted operating income before depreciation and amortisation of $158.7m in the fourth quarter. AOL’s total adjusted operating income before depreciation and amortisation was $123.3m in the quarter.
Total fourth-quarter advertising revenues increased 13 per cent to $410.6m, but AOL failed to boost sales of global display ads – the ads that include graphics and text that appear on the border of a website and are a key feature of AOL’s turnround.
AOL’s global display ad revenues were flat in the quarter, with domestic display ad revenues down 3 per cent. In contrast, the overall US display advertising market increased 21.5 per cent in 2012, according to research firm eMarketer.
Mr Armstrong pledged in 2013 to increase revenues and cut expenses in order to boost profitability.
He said: “AOL’s future and culture can best be summed up by Andy Warhol’s quote: ‘Don’t think about making art, just get it done. Let everyone else decide if it’s good or bad, whether they love it or they hate it. While they are deciding, make even more art.’”