Is Tim Armstrong's plan actually working? Internet company beats estimates
AOL did something on Wednesday that it hadn’t done since its spin-off from Time Warner last December: report a profit bump.
And it was a significant bump. The company reported net income of $171.6 million (or $1.60 a share) during the third quarter, compared to $74 million (70 cents a share) last year. Analysts had been expecting a profit, though a much lower one.
AOL’s revenue, however, slid 26 percent to $563.5 million, with display advertising falling 14 percent, and revenues from search down 28 percent.
Nonetheless, it was an important earnings report for AOL chief Tim Armstrong, who has been trying to turn the former dial-up Internet company into a content creation hub. The profit turn was the first sign Armstrong’s radical approach to redefining the brand might actually be working.
In August, AOL reported a billion-dollar loss for the second quarter. AOL said its third quarter profit was the result of managing expenses and cost control.
“AOL is working hard to redefine the consumer experience on the Internet,” Armstrong said — and he's doing much of that, lately, through acquisitions.
In September, AOL made two, multimillion purchases in one day, acquiring TechCrunch, the well-regarded tech blog and event company, and 5min Media — a company that bills itself as “the Web's largest video syndication platform” — in a deal worth between $50 million and $65 million.
In June, AOL announced an original content strategy that would include the hiring of "hundreds" of journalists. David Eun, AOL’s relatively new president of its media and studios division, told Ad Age: “We are going to be the largest net hirer of journalists in the world next year."
At the time, there was some talk that investors were growing weary of AOL's timeline for a turnaround. But Wednesday's results could buy Armstrong and co. just enough of it to execute one.