AOL Inc reported a surprise second-quarter loss on Tuesday, citing weaker-than-expected advertising growth that sent shares of the company plummeting as much as 20 percent on Tuesday. The company, which Time Warner spun off after a disastrous decade-long merger, is trying to regain its former status as one of the world's most popular online destinations by investing heavily in efforts such as hyperlocal news network Patch and by blockbuster purchases like the Huffington Post.
Advertising revenue rose 5 percent to $319 million. Sales of display ads - big splashy units that appear on Web pages - gained 14 percent, but Evercore Partners analyst Ken Sena was expecting a 25 percent increase. While AOL has finally made progress turning its advertising revenue around after several quarters of declines, Chief Executive Officer Tim Armstrong said display growth should have been stronger.
Integration of the Huffington Post into AOL's properties had to do partly with the slowdown in June display ad sales with July trending the same, said Arthur Minson, chief financial officer of AOL. AOL is up against Google as well as newer rivals like Facebook and Twitter. Its share of online US ad revenue is expected to decline 2.7 percent this year, down from 3.4 percent in 2010, according to research firm eMarketer. Revenue fell 8 percent to $542.2 million, on a 23 percent drop in subscription revenue. Analysts were expecting revenue of $530.4 million. The company said its second-quarter loss had narrowed to $11.8 million.
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