AOL Inc shares tumbled 10 percent on Wednesday after it posted another loss in its content group, reviving concerns that the company's profits were still mostly coming from a shrinking dial-up platform. The stock's plunge was the second-worst decline in 18 months, and follows what had been a 67 percent rise over the last year.
AOL Chief Executive Tim Armstrong has invested heavily in content, including plowing well over $100 million into Patch, a group of hyperlocal websites that covers neighbourhood news and events. Even with all of that spending, the legacy subscription service is still the most profitable part of the company. The membership group, which includes subscriptions, posted operating profit of $146.4 million in the quarter.
AOL's media sites turned in an operating loss of almost $5 million. Those sites, which include Patch, Huffington Post, Engadget and TechCrunch, lost almost $17 million in the year-ago period. Overall advertising revenue for AOL increased 9 percent to $359.2 million, including a 6 percent gain in domestic display advertising.
But it also reported a slowdown in network advertising - ads sold across platforms, sometimes for cheaper prices. That business was up 10 percent in the first quarter versus 31 percent in the fourth quarter last year. Total company revenue increased 2 percent to $538.3 million, missing analysts' expectations of $542.1 million, according to Thomson Reuters I/B/E/S. Net income rose 23 percent to $25.9 million, or 32 cents per share, and met analysts' expectations. Before Wednesday's report, AOL shares had soared 67 percent in the latest 12 months, just slightly underperforming Yahoo.
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