AOL Q4 revenue down 26% with ad struggles

AOL Inc reported better-than-expected profit but revenue declined sharply as the Internet company suffered from slides in advertising sales and dial-up subscriptions.

AOL reported fourth-quarter earnings on Wednesday of USD 66.2 million, or 61 cents a share, as it lowered expenses. In the period a year ago, it earned USD 1.4 million or 1 cent a share. That period included USD 106 million in restructuring costs.

Excluding items, AOL's earnings from continuing operations were 70 cents a share, stronger than the 46 cents a share analysts had expected, according to Thomson Reuters I/B/E/S.

Chief Executive Tim Armstrong has been trying to transform the company, known for its dial-up Internet access business, into an media and entertainment powerhouse. But AOL has struggled to increase its advertising sales, and investors have fled the stock.

Shares have declined about 12% in the last three months, underperforming the media sector as well as the broader Standard & Poor's 500 index.

For the fourth quarter, advertising revenue fell 29% to USD 331.6 million on declines in search, display and third-party ads. Subscription revenue fell 23% to USD 235.9 million.

Overall, revenue fell 26% to USD 596 million. While that surpassed the USD 587.5 million analysts had expected, the sharp drop reflects the troubles AOL is having in a web advertising business dominated by Google.

Google Inc, which has been the search market leader for a decade, reported nearly 30% gains in both profit and revenue when it reported quarterly earnings in January.

AOL was spun off from Time Warner Inc a little more than a year ago. Since then, as a stand-alone company, AOL has been immersed in a blur of sales, launches and acquisitions, including purchasing the influential technology blog TechCruch for about USD 30 million.

The company committed USD 50 million to build out Patch, a network of local community sites totaling 500 this year. More recently, it redesigned its home page and has reached tie ups with celebrities such as Heidi Klum and Gisele Bundchen.