AOL (AOL) reported its earnings this morning (a minor miss) and hosted an earnings call to explain.
During the call, CEO Tim Armstrong said AOL ad revenues won’t start growing again until 2011.
We took live notes:
CEO Tim Armstrong on now:
Context: just finishing first phase of turnaround, just getting started.
Cash operating costs down about $150 Mill this quarter.
Tim speaking very quickly on his second earnings call!
Avoided short-term revenue strategies in favour of longer-term turnaround.
Over 3K freelance videographers and writers are increasing on Seed.com. SXSW was a test ride. Published on every band in attendance. 1300 interviews by seed contributors. Over 2K articles this year vs. 40 last year. 40% traffic increases from referrals on Spinner this year as a result.
Advertiser demand is tightening. Q1 weakness mostly related to restructuring and transitioning from old ad systems to new, better ad systems. Nine weeks into new sales structure.
Have been developing a smaller sales team for smaller advertisers (outside CPG and other big brand advertisers).
Still working on the network.
Will be hiring more salespeople througout the year.
Mapquest reaches 1 in 5 web surfers. Launched 13 new cities in Q1. #2 mobile city guide. This is a good product that will be invested in. Can scale and partner to grow across US.
Facebook integration rolled out across Aol, including AIM. Getting good leverage with AIM on the iPad.
Sold ICQ. Popular in markets Aol is de-emphasising or not a player at all. Should close over next few months.
CFO Arthur Minson:
$125 Mill in FCF during quarter, for cash balance around $260 Million.
Might sell or close Bebo, but decision hoping to be made by the end of May.
$30 Million lost in ad revenue due to product shutdowns.
Display down 13% (domestic down 10%). Sales of premium inventory was up slightly y-o-y and was impacted by salesforce re-structuring. This is going to flow through to Q2 and Q3 so display performance will be worse than in Q1 (not good).
TAC was down $44 mill vs last year.
Subscription revenue down 28%. ARPU down 1%. Churn down 3%.
5000 employees from 7000 last year, still working on international shut downs.
Also re-investing selectively, not just cutting costs.
$65 to $75 million more re-structuring costs will pinch FCF the remainder of the year.
Overall display trends: Overall growing demand, especially from brands. Auto, CPG, Finance still very weak though.
Advertiser feedback has been “overwhelmingly positive” – the demand for Aol products and services is up, not down. The company had to make tough short-term revenue decisions for long-term gain, but this wasn’t indicative of advertiser demand being down.
Salespeople who were not impacted by the re-alignment are above budget across the board (this is good), so a good core indication of demand.
Search declines: 2H will be impacted by Country shutdowns (like France and Germany) so expect more weakness.
As the company becomes more efficient with the new CMS editorial costs should come down further. Big focus on yield management with the new CMS.
Third-Party ad sales: This is very important for the company. Some Ad.com technology is very strong with regard to exchanges and other valuation methods that is growing in importance. Ad Learn is one of the best technologies on the internet for valuing individual impressions in real-time, according to Armstrong.
Search deal: Are in a rush to get the right deal, not necessarily to get the deal done. Will see “activity” about the deal over the Summer and into the Fall.
Patch/Local: Haven’t begun monetization on this yet though there is some revenue coming in. Need to continue to optimise user experience.
Growth in domestic display likely won’t come until Q1 2011 (that’s a little surprising – many likely hoping for somewhere in latter half of 2010).
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