Ad growth drives AOL Q1 sales beating forecast

US media technology major AOL Inc yesterday reported a 7-per cent growth in revenues at $625.1 million in the first quarter compared to a year ago, amid expectations of around $595 million rise by analysts due to challenging market conditions for technology stocks.

The Q1 sales were driven by growth in global advertisement revenue which was up 12 per cent at $483.5 million compared with last year.

Adjusted earnings per share improved to 34 cents that was 2 cents above analysts' forecast of 32 cents.

Further to the earnings release, AOL stock jumped 10.2 per cent on after-hours trading yesterday to close at $43.42 in New York, the stock's biggest jump since January 2014.

AOL CEO Tim Armstrong said in a release, ''AOL grew its consumer base strongly and saw continued strength in video, mobile and programmatic advertising, while we also updated the structure and capabilities of the company.''

''AOL continues to grow in strength and we are on a mission to scale the first media technology company of the internet and mobile age,'' he added.

AOL's revenues come from its three main business segments -  advertising on own sites, called the brand group; ads on third-party sites, referred to as AOL platforms; and legacy dial-up subscriptions, called membership group..

Platforms generated the best growth in revenue of 21 per cent at $280 million, on the back of premium formats, particularly video.

The brand group revenue was up 8 per cent at $193 million which was boosted by a 28-per cent growth in search revenue. In contrast, AOL's subscription revenue fell 7 per cent to $183 million. Subtracting intersegment eliminations of $31 million, the total Q1 revenue was $625 million.

Net income was down at $7 million from $9.3 million a year ago, on account of expenses to cut jobs, interest costs on debentures and exchange rate fluctuations.

The number of domestic AOL subscribers fell 11 per cent to 2.2 million in the quarter, while average monthly multi-platform unique visitors increased 12 per cent to 190,000.

AOL's main rivals in the ads field are Google, Facebook and Yahoo as all are ramping up programmatic ad technology, while in the subscription field competition is stiff from broadband providers such as AT&T, Verizon, etc.

According to Armstrong, AOL is gearing up to move to a credible third position in online advertising, which is dominated by technology giants Google and Facebook.

Automated advertising accounts for about half of AOL's non-search ads. Last month, AOL unveiled its new integrated programmatic ad platform, One, which helps marketers decide where to best spend their money.

Automation brings more data to the advertising, which makes the ads better and more effective, and consumers like them better, Armstrong said.

Since January, there have been rumors about telecom giant Verizon approaching AOL for select parts of its business or joint venture  in specific areas such as AOL's programmatic advertising and legacy dial-up business.

Verizon could benefit from AOL's programmatic advertising to compete with arch rival AT&T providing an ad product alongside its video service, while dial-up could add new broadband connections.