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Stephen Logan

AOL Q1 Profits Slide but Display Ads Bounce Back

5th May 2011 Paid Search, Display Advertising 2 minutes to read

As a business in transition, it probably won’t come as too much of a surprise that AOL has once again seen revenue  and profits slipping. The good news though comes in the form of income from display ads, which saw global growth of 4 percent [see: AOL’s Q1: Display Ad Revenues Finally Going Up, But Profits Are Down 86 Percent | TechCrunch].

However, as reported yesterday, this comes off the back of some pretty shaky figures in the last couple of quarters, which saw back to back reductions of 26% in overall revenue [see: AOL to Develop Larger Display Ads in Profits Push]. It also masks a huge drop of some 86% in profits, although this can largely be explained away by the significant investments made during this period – most notably the Huffington Post for $350 million.

The fresh boost in display advertising shows that their ads (and content) are getting seen; however, it is a sign of recovery, not marked growth. Because, whilst revenue jumped up by 4 percent during the first few months of 2011, it had previously declined by 14 percent in Q4 2010.

In the U.S the picture for AOL is a mixed bag. Whilst their revenue from display advertising has grown by 11 percent, their overall market share has flat-lined. The Facebook factor has to be considered here though, with the social networking giant now controlling a third of the market and gaining in excess of 346 billion impressions – almost double what they received in 2010. The latest ComScore figures also show that AOL continues to enjoy a 3 percent share; with 33.5 billion impressions in 2011, up from 32 billion during the same period last year.

With Microsoft losing 10% of their display advertising impressions and Yahoo shrinking by almost 15% (19 billion impressions in real terms), these stable figures won’t be viewed too negatively. However, to reiterate the points made yesterday, the huge investment AOL has made in content needs to pay dividends. This means increasing global display ad market share, especially if they are to plug the holes left by the dwindling search and subscription parts of the business.

So once again, all eyes this year will be on Yahoo and the company formerly known as America Online where content production and display advertising is concerned. Both have put most (if not all) of their eggs in this one basket, making significant investments along the way, therefore returns will be expected soon. The strategy may be ongoing but, as of yet, the results aren’t showing.

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