Strong advertising sales boost AOL revenue

Thu Nov 6, 2014 11:21am EST
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By Jennifer Saba and Anya George Tharakan

(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.   Continued...

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