AOL (AOL) reported its latest earnings report this morning. The results weren't terrible, but there were certainly a lot of questions raised.
On the positive side, AOL was able to keep its churn rate down for its membership services and its prices up. It also saw its ad tech revenue grow well on the top line from a year ago. The combination allowed it to meet analyst expectations for the quarter, for the most part.
On the negative side, AOL's search, brands and display business was essentially flat. Also, the only part of AOL's business that makes money is still the dial-up subscription service. According to AOL, in the quarter the brand group contributed $13 million in adjusted OIBDA, dial-up provided $143 million, the ad tech platforms group lost $5 million and corporate lost $30 million.
Altogether, the company reported $121 million in adjusted OIBDA, about $20 million less than what the dial-up business provided.
When Tim Armstrong took over leading AOL a few years ago, his vision was to build up the content part of AOL while milking the profits from the dial-up business as long as he could. Then, about 18 months ago, he decided to invest heavily into ad tech. To his credit, he did this faster and earlier than people at Yahoo! (YHOO) or even Facebook (FB).
Programmatic is where the world is heading and AOL certainly has a good collection of assets. The top-line growth has been great for AOL in the last few quarters, especially thanks to the Adap.tv acquisition. The problem is that it's not making any money for the company yet.
The company would argue that you have to make the investment now in order to reap the benefits later. I don't disagree with them.
The question is -- to me, based on this quarter -- should AOL continue to keep its content properties? They're all flat. They're not really contributing anything. They're all part of Tim's old strategy. Maybe he should sell off HuffPo, TechCrunch and MapQuest. Maybe he should instead double down on ad tech.
You could probably get $500 million for all the various properties. If they're not growing, why not trade them for some other differentiated assets?
On the call this morning, Armstrong kind of hinted that AOL would sell MapQuest in 2015.
Armstrong is in a tough spot. I think he made the only play he could with ad tech. He's got to hope it starts paying off soon in profits. To me, it probably makes sense to sell of the content properties.