So, How Was MSN's Q3? AOL Should be Proud

The worst-performing division at turbocharged global behemoth Microsoft (MSFT) is–you guessed it–online services.  But the news this quarter is actually not uniformly bad:

  • Advertising revenue rose 25% on an organic basis, 33% with half-quarter contribution from aQuantive.  This is a deceleration from last quarter’s 33%, which is bad, but the absolute growth rate wasn’t horrible.  Yahoo, for example, grew only 12% (though revenue on Yahoo’s own properties grew 20%-30%).
  • Display advertising rose 23%, which also isn’t bad.  That’s about in line with Yahoo.
  • Operating loss swelled again, to 39% of revenue, or $264 million, but this included non-cash intangibles from aQuantive.  Strip out those, and the organic operating loss was 31% of revenue, or $206 million.  Now Microsoft’s online business is only losing $800 million a year!

Bottom line, revenue is growing, and operating loss–finally–is shrinking in absolute terms and as a percentage of revenue.  All is not good, but perhaps all is not lost.

See Also:
Microsoft’s MSN: Still Sucking Wind After All These Years
SAI’s Microsoft Online Key Data Spreadsheet

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