AOL revenue beats estimates as ad sales jump

Thu Feb 6, 2014 11:10am EST

The AOL logo is seen at the company's office in New York November 5, 2013. REUTERS/Andrew Kelly

The AOL logo is seen at the company's office in New York November 5, 2013.

Credit: Reuters/Andrew Kelly

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(Reuters) - AOL Inc on Thursday reported a better-than-expected 13 percent rise in quarterly revenue, helped by higher ad sales and cited its best growth in a decade.

AOL's shares advanced 6 percent to $50.59 in morning trade after the results were released.

The company, which is trying to rely less on its declining dial-up subscription service, has turned its focus to reap more advertising dollars from brands.

That involves targeting three areas of growth in digital advertising: video, mobile and "programmatic" buying, where machines buy and sell advertising on electronic exchanges.

"The investments we have made are paying off," Tim Armstrong, AOL CEO said in an interview.

Advertising revenue soared 23 percent to $507 million on strong growth at its third party network, which includes its recent acquisition of video advertising platform Adap.tv.

AOL bought Adap.tv for $405 million last year.

That compares with Yahoo - AOL's most direct competitor - which turned in a bruising fourth quarter. Yahoo's revenue from display advertising fell 6 percent on lower priced ads.

"Tim is a year ahead of the market in terms of strategic decisions," said Laura Martin, an analyst with Needham & Co, who noted that Armstrong turned to programmatic buying earlier than its rivals.

AOL said its Brand Group, which includes media properties like The Huffington Post and TechCrunch, had increased its adjusted operating income before depreciation and amortization (OIBDA) to $35.6 million in the quarter, from $8.8 million in the same quarter last year. That is partly because of deep cuts at its hyperlocal network of neighborhood websites Patch. AOL handed majority ownership of Patch to turnaround firm Hale Global in January.

The company's total revenue was $679 million in the fourth quarter beating analysts' forecast of $655.8 million, according to Thomson Reuters I/B/E/S.

Net income attributable to AOL rose to $36 million, or 43 cents per share, in the quarter from $35.7 million, or 41 cents per share, a year earlier.

Excluding items, the company earned 64 cents per share, according to Thomson Reuters I/B/E/S, which came in above analysts' average estimate of 60 cents.

(Reporting by Jennifer Saba in New York and Sruthi Ramakrishnan in Bangalore; Editing by Kirti Pandey, Saumyadeb Chakrabarty and Sofina Mirza-Reid)

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