AOL Ad Sales Rise, But Patch Weighs on Profit

In August, AOL cut Patch staff in half

AOL Inc reported higher-than-expected third-quarter revenue on increased advertising sales, but earnings fell sharply because of challenges at its network of community news websites known as Patch.

The digital media and entertainment company said on Tuesday it took a pre-tax restructuring charge of $19 million and an impairment charge of $25 million, both related to Patch, sending operating income down 61 percent to $16.7 million.

Chief Executive Tim Armstrong made a big bet on Patch, spending more than $150 million on the network of local news sites dotting communities throughout the United States. But in recent quarters AOL has retreated, making deep cuts in the money-losing operation, and in August it cut the Patch staff by half, to about 500 employees.

Still, the troubles at Patch did not hurt the company’s ability to increase advertising revenue, an important metric for AOL as it moves away from dwindling but lucrative subscription dollars for its dial-up Internet service. Ad revenue rose 14 percent to $386 million.

At its Brand Group, which includes the Huffington Post and TechCrunch, display ad revenue increased 11 percent. The group’s adjusted operating income was $11 million before depreciation and amortization, compared with a loss of $10 million a year earlier.

Total revenue in the third quarter rose 6 percent to $561.3 million, topping analysts’ average forecast of $531.7 million. The rise included the results of Adap.TV, an electronic exchange for video advertising that AOL bought in August.

Net income attributable to AOL fell to $2 million, or 2 cents per share, from $20.8 million, or 22 cents per share, a year earlier.