AOL Ad Revenue Still Down, Somewhat by Design

AOL continues to feel the effects of its ad inventory reduction. The company reported its display ad revenue dropped in Q3 of 2010 along with revenue from its own properties and its network, compared to the same period last year.

“We expect in 2011 to start showing the signs of a turnaround,” said AOL CEO Tim Armstrong. “I would personally be disappointed to not be back at industry growth rates for advertising, and we are pushing every single thing in this company as fast as possible to get back there,” he added.

AOL reported its overall advertising revenue fell 27 percent in the third quarter since the same time last year, with drops in international display, search and contextual, and third party network revenues leading the charge. International plummeted 54 percent in Q3 2010 compared to Q3 2009, while domestic dipped 8 percent. The international display drop was attributed to a departure from European markets, and the firm’s sale of social network Bebo. Third party network ad revenue was down 41 percent in the third quarter compared to Q3 2009.

The company did, however, tout some positives in the display arena. Display revenue rose quarter-over-quarter for the second consecutive quarter. Also, Armstrong pointed to some pickup in sales to premium advertisers – a goal of its inventory reduction strategy.

“Sixty percent of sold campaigns on the homepage were the premium advertisers, versus 50 percent the same period a year ago,” said Armstrong. He continued, “Homepage pricing remained up double digits and revenue grew year-over-year despite us significantly pulling back the number of ads on the homepage.”

AOL relaunched its homepage yesterday. Today, a holiday shopping-themed rich media ad for Walmart is running on the homepage, promoting deals on laptops and televisions.



Another plus, according to Armstrong: video ad sales had “double digit growth” year-over-year in Q3.

The firm has weeded out half of its AOL property inventory in the past year, and reported a boost in yield. Still, the company said sales of AOL property inventory through its network is down approximately 20 percent year to date.

Also attributed to its inventory reduction strategy, the company’s search and contextual revenue fell 28 percent in the third quarter compared to the same period last year. “In order to improve the consumer experience, we have reduced the number of contextual links served by approximately 80 percent from approximately 25 billion in the third quarter of last year to 4 billion, and we have exited a number of European countries where we were losing money,” said AOL CFO Arthur Minson.

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