November 6, 2014 / 12:17 PM / 3 years ago

Strong advertising sales boost AOL revenue

3 Min Read

The AOL logo is seen at the company's office in New York November 5, 2013.Andrew Kelly

(Reuters) - AOL Inc reported stronger-than-expected revenue growth as advertisers used the digital media company's automated platforms to buy and sell digital ads.

Total third-quarter revenue rose 12 percent to $626.8 million, ahead of the average analyst estimate of $623.5 million, according to Thomson Reuters I/B/E/S.

Advertising revenue jumped 18 percent to $473.4 million largely due to a huge uptick in third-party platform sales, where AOL helps advertisers place their dollars on other digital properties.

Still, investors sent AOL shares down about 6 percent to $41.36 in morning trade on Thursday.

Evercore ISI analyst Andrew McNellis said Wall Street is likely responding to AOL's miss on adjusted operating income before depreciation and amortization (OIBDA), which rose 2 percent to $121.8 million. McNellis was expecting $126 million.

"The top line is strong and that is the most important fundamental," he said.

AOL owns media properties like The Huffington Post and automated advertising platforms like Adap.TV, and has been in the midst of a turnaround as it moves away from subscription dial-up revenue.

The company is likely benefiting from a growing trend of advertisers earmarking more TV ad money to digital video. Several media conglomerates reported weak advertising revenue at their cable divisions this week. Some of the shift comes as poor ratings cause advertisers to seek out digital video.

AOL Chief Executive Tim Armstrong said in an interview that consumers are moving more quickly than expected to streaming video products, mobile and web video.

"Advertisers are trying to quickly move more TV dollars to digital video," he said.

At AOL's Brand Group, which includes The Huffington Post and TechCrunch, revenue fell 3 percent to $187.3 million mainly because of the shuttering of Patch, its former group of hyper- local websites. Excluding Patch, revenue rose 1 percent.

AOL Chief Financial Officer Karen Dykstra said the company is getting double-digit price increases for ads on some of its brand properties and that the company will continue to focus on video and hone the portfolio.

Net income attributable to AOL rose to $28.5 million, or 35 cents per share, for the third quarter ended Sept. 30, from $2 million, or 2 cents per share, a year earlier.

Excluding items, the company earned 52 cents per share, in line with analyst expectations.

AOL also said it had completed an investigation into a data breach in April and it will not incur any related material loss. (1.usa.gov/1vO56MA)

AOL had urged its tens of millions of email account holders to change their passwords and security questions after the cyber attack compromised about 2 percent of its accounts.

Reporting by Anya George Tharakan in Bangalore; Editing by Don Sebastian and Meredith Mazzilli

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