AOL Sees Ad Revenue Growth, Patch to Be Outsourced or Sold

Patch logoAOL announced Q3 earnings this morning. Revenues for the quarter were $561 million. The company saw 14% revenue growth driven primarily by its third party ad network and video in particular:

  • 32% growth in Third Party Network revenue driven by growth in the sale of premium formats, primarily video, across our programmatic platform. Third Party Network revenue includes $17.6 million from Adap.tv following its acquisition on September 5, 2013 and grew 17% excluding Adap.tv.
  • 5% growth in global display revenue driven by improved pricing.
  • 3% growth in global search revenue driven primarily by an increase in revenue per search.

AOL ISP subscription revenue declined and there was a $25 million impairment charge associated with Patch cost cutting and restructuring.

AOL Q3 earnings

AOL CEO Tim Armstrong said on the earnings call that “Patch will move to run rate profitability by the year’s end through a combination of operational changes and a partnership model for operations or strategic alternatives.” The latter means a potential sale. CFO Karen Dykstra added that AOL is “committed to either a partnership, some kind of model or transaction by the end of the year.”

The contention is that Patch will be profitable on a “run-rate” basis (one way or another) by the end of 2013. Accordingly, I infer that much of the local content on Patch will either come from a third party publisher or publishers or the property will be sold off.

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