Membership revenue declined 7% in the quarter although display ad revenue rose 4%, and the brand group’s search revenue rose 10% year-over-year. Much of the upturn is related to the closing of AOL’s Patch websites.
The company’s platforms group posted a 54% gain in revenues, which the company attributes to the automated video ad sales service Adap.tv that AOL acquired last August. Traffic acquisition costs (TAC) rose $18 million year-over-year, well below the first-quarter’s TAC growth of $53 million.
Continuing to boost its ad platform revenues and keeping its TAC under control could invigorate the company’s profits, which have been a bit of a disappointment so far this year. The company’s CEO said:
AOL grew consumer usage, video, programmatic advertising, branded content, and ad pricing throughout the first half of 2014, and we will continue to make AOL one of the best operating companies in our industry.
That’s great, but nothing there refers to profits. Until AOL can either manage profit forecasts or actually produce profits to meet analysts’ estimates, the company’s stock price will not improve.
We’ll have to wait for the conference call for any guidance, but the consensus estimate for the current quarter calls for EPS of $0.52 on revenues of $621.01 million. For the full year, the estimate for EPS is $2.07 on revenues of $2.53 billion.
AOL’s shares closed at $39.00 Tuesday and gained about 3.5% in premarket trading Wednesday to $40.53. The stock’s 52-week range is $32.19 to $53.28. The consensus price target for the shares was around $47.30 before this report. The price target has fallen by $5 a share since the end of the first quarter, and the 52-week range is unchanged.
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