AOL Profits Sag, But Wall Street Loves Them Anyway

Higher ad revenue helps slow AOL’s revenue decline and pushes the company past Wall Street’s forecasts

AOL’s revenue declined 9 percent in 2011, but in a sign of how things have been going for the aging internet giant, CEO Tim Armstrong said Wednesday that that’s a good thing.

Armstrong & Co. beat Wall Street estimates Wednesday despite posting a 66 percent decline in fourth-quarter profits – a result of lower subscription revenue and higher costs.

That 9 percent decline in revenue was the smallest dip in five years, and advertising revenue, which had been contributing to said downturn, rose for the third quarter in a row. Ad revenue bumped up 10 percent to $364 million.

Still, that strong advertising performance could not offset an 18 percent decline in subscription revenue or the cost of projects like Patch.

Also Read: Huffington Post Preps Online Streaming Network

Under Armstrong, AOL has begun to find an identity, pivoting from a subscription-based Internet company to a media company. The acquisitions of Patch and the Huffington Post typify that change, but while HuffPo continues to grow, Patch has yet to pan out.

Armstrong is on the record saying this would be the localized news service’s worst year from a financial perspective, expecting Patch to become a major money maker in the years to come.

The increased ad revenue was enough to sway Wall Street, which has boosted the company’s stock by 14 percent thus far.