AOL sees revenues slide, profits rise
The Web portal reports a 26 percent drop in revenue for the third quarter. Net earnings were buoyed by the sale of investments in Kayak and its ICQ operations.
AOL is having some trouble maintaining its revenues, the company reported today.
During the third quarter, AOL generated $563.5 million in total revenue, a drop of 26 percent from $763.9 million for the same period in 2009. The company's advertising revenue, which was $292.8 million on the quarter just ended, slid by 27 percent from the $402.3 million it generated in 2009. AOL's subscription revenue, which was once the main revenue driver for the company, declined by 26 percent from $332.2 million to $244.8 million because of a 24 percent year-over-year loss of its subscribers.
As disconcerting as it might be for AOL to see its revenues drop, the company posted a 132 percent increase in net profits on the quarter, jumping to $171.6 million in the third quarter of 2010 from $74 million in the year-ago period. However, AOL said, that growth reflects the gains on the sales of its investment in Kayak and its ICQ operations.
AOL sold its investment in Kayak for $19 million earlier this year. The company sold its ICQ messaging service to Russia-based Digital Sky Technologies in April for $187.5 million.
Operating income for the third quarter dropped 34 percent to $80.9 million from $122 million a year earlier.
AOL also revealed in its report that its acquisitions of 5min, TechCrunch, and Thing Labs cost it about $97.1 million. It could dole out an additional $23.1 million to those companies over the next three years, as long as their founders stay with AOL during that period.
CEO Tim Armstrong put a brave face on his company's earnings.
"In Q3, AOL continued on the path towards better health through targeted acquisitions and smart dispositions, meaningful product improvements, site relaunches, and strategic partnerships, all of which will enable us to execute more quickly against our strategy," Armstrong said in a statement.
Update, 8:43 a.m. PT: Looking ahead, AOL will have some new executive leadership to lean on. Shortly after releasing its third-quarter results, the company announced a pair of key appointments.
Next week, Erynn Petersen will join AOL as vice president of developer evangelism, coming to the company from Microsoft, where she was responsible for advertising engineering integration with partner Yahoo. Earlier she was co-founder and CEO of Sonition, a company that dealt in technology for auction automation, and also worked in product management and business development at Amazon.
At the end of the month, Curtis Brown will come to AOL as senior vice president of engineering for AOL Media, having most recently served as chief technology officer at Kaplan Test Prep. Earlier in his career, he was CTO at CTB/McGraw-Hill, The Princeton Review, Oxygen Media and Skymall, and also worked at CDNow, an early music e-commerce company.
"AOL was founded on the idea that great engineering is behind great consumer experiences," said AOL CTO Alex Gounares in a statement. "Curtis and Erynn are just the kind of world-class engineers we want to be known for -- proven leaders and innovators in the technology industry."