AOL had a rough quarter. Total revenues dropped 23 percent, and even the advertising part (you know, AOL’s future) was down 19 percent to $354 million. In the same quarter, Yahoo saw display advertising revenues rise 20 percent, Google’s ad revenues were up 21.5 percent, and even Microsoft saw a 12 percent uptrick in online revenues. “We are hustling as fast as we can,” offered AOL CEO Tim Armstrong on the earnings conference call today. But Armstrong, who is an avid marathon runner, knows he needs to hustle faster. “We are not happy with overall lagging the ad market,” he acknowledges, and promises to “put our foot on the gas pedal.”
One big cause of the flagging ad sales is that AOL’s sales force is still going through a wrenching transition where 80 percent have been assigned new accounts and are now organized differently. So that is still working through the system. But if you look at the breakdown of ad revenues there are other things to worry about as well.
The highly profitable subscriber business is going away, and that is baked into the stock. But AOL’s biggest hit to ad revenues was in search ads, which come primarily from its partnership with Google. This is why AOL’s search market share in the U.S. is in decline, and is now down to 2.5 percent. The most avid searchers on AOL, however, are AOL subscribers, and as they go away so does their search activity. So, while display ad revenues were down 13 percent in the quarter and third-party network ad sales were down 17 percent, search ads were down a whopping 27 percent.
Armstrong notes that AOL’s search partnership with Google lasts until December and that a new deal won’t be finalized until the summer or early fall. It sounds like it is still Google’s deal to lose, but Bing might still have a shot. Overall, Armstrong is bullish about demand from advertisers and expects that once the sales force gets on its feet AOL’s results will be more in line with the market. AOL’s stock is down 12 percent today to $24.55. Time to pick up the pace.
Tim Armstrong was appointed CEO and Chairman of AOL in March 2009. Before becoming the CEO of AOL, Armstrong presided over Google’s North American and Latin American advertising sales and operations teams. His team provided customers with local partnerships as well as centralized sales and services. They worked with some of the world’s most widely recognized brands and advertising agencies in addition to some of the fastest growing medium-sized companies. Armstrong joined Google from Snowball.com, where he was vice president of...
AOL is a global advertising-supported Web company, with display advertising network in the U.S., a substantial worldwide audience, and a suite of popular Web brands and products. The company’s strategy focuses on increasing the scale and sophistication of its advertising platform and growing the size and engagement of its global online audience through leading products and programming. History of Aol: AOL was founded in the early 1980’s as Control Video Corp, with an online service, Gameline, for the Atari 2600 console. ...
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