AOL Inc.’s third-quarter revenue dropped 6 per cent because of its dwindling dial-up Internet access business though it beat analysts expectations and its stock rose more than 8 per cent.
The company reported Wednesday revenue of $531.7-million (U.S.), ahead of analysts’ estimates of $524-million, according to Thomson Reuters I/B/E/S.
“Investors have gotten used to disappointment from AOL especially in the forward outlook,” said Benchmark analyst Clayton Moran. “Mainly there are no negative surprises in this quarter... and the forward outlook seems to be more stable.”
Prior to Wednesday’s rally, AOL shares were down more than 40 per cent year to date.
The company, which Time Warner spun off after a disastrous decade-long merger, is trying to regain its status as a popular online destination that attracts advertising dollars from the likes of auto companies and consumer packaged-goods makers.
Total advertising revenue rose 8 per cent to $317.7-million on the strength of its Ad.com network and international display advertising.
Overall display advertising -- representing big splashy ads that appear on Web pages and command higher rates -- rose 15 per cent in the quarter.
But AOL’s share of display advertising has slipped as it faces stiff competition from Yahoo , Google and Facebook, which are all going after the same ad dollars.
Research firm eMarketer estimates that AOL’s share in the United States will fall to 4.2 per cent this year, down from a share of 10.6 per cent in 2007.
That is compared to Facebook, which is expected to surpass Yahoo’s share for the first time this year reaching a 16.3 per cent share, according to eMarketer.
On top of it, AOL is losing subscribers to its lucrative access business. Subscription revenue, which represents 36 per cent of total revenue, declined 22 per cent to $192-million.
AOL reported a third-quarter loss of $2.6-million, or 2 cents per share, from continuing operations, compared with a profit of $171.6-million, or $1.61 per share, a year ago.
Analysts were expecting a loss of 6 cents.
