Wednesday, May 8, 2013

AOL post revenue growth, but brands division remains unprofitable due to Patch investment

The company that used to be synonymous with New Media, AOL, today released its Q1 earnings for 2013. The company saw top line revenue grow 2 percent, with the Brand Group leading the way with a 14 percent increase in revenue, reflecting display and search revenue growth.

The Brand Group consists of AOL properties such as Engadget, Huffington Post, MapQuest, TechCrunch and Patch, its local news network of sites. That group remains in the red, though because of revenue growth, was able reduce its loss considerably, as measured by OIBDA (operating income before depreciation and amortization).

"While significantly improved, Brand Group Adjusted OIBDA remains negative reflecting our investment in Patch and in our editorial and engineering staff at our core brands and in our sales force domestically and internationally," the company said in its earnings statement.

The majority of AOL's profits (actually, all the company's profits) remain in its Membership Group, which consists of its subscription services, AIM and AOL Mail – in other words, that things that many people have associated with AOL down through the years. This part of the business is going away, albeit slowly, and the battle is over replacing this income and profits with growth in its brands and AOL Networks division (which consists of ADTECH,, Sponsored Listings, and so on).

"Membership Group revenue reflects a 9% decline in subscription revenue driven by 15% fewer domestic AOL- brand access subscribers year-over-year. Subscription revenue year-over-year declines remained near multi-year lows due to a continued historically low churn rate of 1.9% and 7% year-over-year growth in domestic average access subscription monthly revenue per AOL-brand access subscriber."