emphasise third-party ad networks at the expense of high-margin premium ad sales…it seemed like such a good idea at the time (to the architects of the network strategy that AOL launched last year, which has since bombed.)
But first, the good news:
- AOL’s EBITDA actually grew modestly year over year, thanks to cost cuts. There is one thing that AOL’s management excels at, and that’s firing people.
- The decline of the subscription business appears to be slowing, and it’s still highly profitable. AOL only lost 573,000 subs this quarter and still has 6.9 million left. The business that no one wanted a year ago is still spinning off serious cash.
And now, the bad news:
- Ad revenue dropped 18% year over year. And that’s including growth in AOL’s search business, which is eventually going to disappear.
No surprise, therefore, that AOL is backtracking on the emphasise-networks plan and replacing Advertising.com boss Lynda Clarizio with Yahoo’s display-ad god, Greg Coleman.
All is not lost: AOL’s premium inventory is growing nicely. If Greg can sell some ads, the business ought to stabilise before long.
Revenues decreased 23% ($283 million) to $968 million, including declines of 27% ($160 million) in Subscription revenues and 18% ($113 million) in Advertising revenues. Adjusted Operating Income before Depreciation and Amortization increased 6% ($24 million) to $405 million. The current and prior year quarters reflected restructuring charges of $2 million and $98 million, respectively. Operating Loss of $1.9 billion represented a decline of $2.2 billion compared to the year-ago quarter’s Operating Income of $274 million, resulting from a $2.2 billion noncash impairment to reduce the carrying value of goodwill and a $13 million noncash impairment related to asset writedowns in connection with facility consolidations.
Key Operating Metrics
During the quarter, AOL had 109 million average monthly domestic unique visitors and 54 billion domestic page views, according to comScore Media Metrix, which translates into 165 average monthly domestic page views per unique visitor.
As of December 31, 2008, the AOL service had 6.9 million U.S. access subscribers, a decline of 573,000 from the prior quarter and 2.4 million from the year-ago quarter, reflecting subscriber losses due partially to AOL’s strategy to prioritise its advertising business.
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