Some one-time stuff, but still not good news. Despite the mass layoffs, AOL’s operating income will be down in Q1, too. Operating income will also likely be down for the full year 2008.
CFO John Martin’s AOL commentary from the call:
–stabilised pageviews in Q4 (FLAT y/y)
–One goal: increase usage on AOL, working very hard to do this
–Ads up 10% in Q4 to $620 million (Deceleration)
–Display: $252, up only 3%
–Impression gains offset by trends (shift to third-party networks) and management decisions
–We have adjusted sales process, integrated ad sales w/ Tacoda, etc.
–Discontinued some crappy deals ($25mm)
–Paid search, $170mm, up only 1%
–Europe paid search, 20% of whole, declined 8% due to change in Google deal
–US up mid- single-digits (lower users, lower click rates)
–Platform A Ad revs $200mm, up 30%.
–Half of this growth from acquisitions
–Still, encouraged by organic growth
–[Keep in mind that this ad revenue is far lower margin than typical AOL ad revenue]
–in Q1, ad revenue WILL BE FLAT TO DOWN
–last year benefit $19mm one-time
–more discontinued crappy deals
–Apollo deal restructured
–In Q1, operating income will be down
–loss of subscribers starting to hit operating income
–Presumably transition to lower-margin Platform A also having impact
Weakness at AOL not related to economic weakness. However, at Time Inc, company is seeing ad weakness related to economy.
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