AOL Income Down 61% in Third QuarterBy: Sean Patterson - November 5, 2013
AOL today released its third quarter earnings report, showing a large 61% year-over-year drop in operating income to just 16.7 million. This on total revenues of $561 million, a 6% increase from revenue generated during the third quarter of 2012.
The shortfall was not due to advertising revenue, which rose 14% year-over-year to $386 million. Ad revenue from both the company’s display and search divisions were up. The company’s third party network revenues also rose by 32%, though its subscription revenue fell 7% to just $161 million.
The lowered income can be directly attributed to restructuring costs and two impairment charges taken during the quarter, one for $19 million and the other for $25 million. The two non-cash asset impairments were related to AOL’s Patch initiative.
Patch is a system of web-based local news sites in the U.S. AOL has hundreds Patch employees spread throughout the U.S., though the company recently announced significant layoffs for the program. AOL Chairman and CEO Tim Armstrong stated in August that up to 300 local Patch sites are slated for elimination. The cuts are expected to lower administrative costs for AOL as a whole.
Another large expense during AOL’s third quarter was its recent acquisition of Adap.tv. The $405 million deal closed in early September and now represents Armstrong’s biggest purchase since he took over AOL operations in 2009. Adap.tv operates a video advertising platform that AOL believes will supplement its digital video initiatives and bring in further ad revenues.
“AOL’s Q3 results are another step forward in our long-term plan,” said Armstrong, AOL Chairman and CEO. “The Q3 results highlight the strength of AOL’s strategy and the consistent execution of our team in delivering great consumer experiences and successful customer results.”