Ad revenue rises at AOL, but Patch weighs on results

Reuters | Forbes

AOL announced its third quarter earnings Tuesday. Ad revenue grew at the company, but expenses related to Patch weighed on results.

Ad revenue grew 14 percent over the third quarter of 2012 and, as Reuters reports, “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.”

“AOL’s Q3 results are another step forward in our long-term plan,” Tim Armstrong, AOL Chairman and CEO, said in a news release. “The Q3 results highlight the strength of AOL’s strategy and the consistent execution of our team in delivering great consumer experiences and successful customer results.”

And major job cuts.

Page eight of the company’s 16 page earnings presentation reads “AOL Has a Track Record of Expense Reduction: AOL continues to reduce expenses while growing revenue.” The chart shows expenses of $46 million in Q3 2012, down to $34 million in Q3 2013.

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,” Reuters reports. “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”

AOL’s Brand Group, which includes The Huffington Post and TechCrunch, grew display ad revenue by 11 percent.

AOL CFO Karen Dykstra said in an earnings call Tuesday that the company expects Path to be profitable by year’s end, and they’re looking for partners for some Patch sites, Jeff Bercovici reports.

“Dykstra said AOL has heard from potential partners or buyers on the national, regional and local levels and has every intention of reaching terms with some of them soon. ‘We are committed to either a partnership of some kind of model or a transaction by the end of the year, bringing Patch to exit the year at profitability,’ she said.”

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  • MM

    Patch should attack the $1B legal notice market. In every market they are in, they compete at a disadvantage because the local paper gets legal notice revenue somewhere between $10K and $200K, with no sales cost. Having worked at small newspapers it is their life blood. But the environment is changing. Until Patch can convince the state legislators that they should be the publisher of record of legal notices, the local newspaper will survive, putting Patch at a disadvantage. Patch will never thrive as long as the local newspaper exists. It may be nice to say that “we can all compete together” but the reality of the local markets is that there is only room for one.

  • markisenberg

    Patch is a failure and we should just accept the fact that AOL sometimes can make a big mistake instead of trying to qualify the mistake. Very few local sites were read because there was little important news or events information on them that could not be found elsewhere.The local editors had limited resources and regional editors had little to give them.Everybody wrote goodbye letters last month to thank the few readers who even cared about Patch. It tells us Mr.Armstrong is not a genius and should be questioned closely before implementing his next big idea.