Around 3 months back, when I wrote this article, it was an eventful period for AOL, Inc. (NYSE:AOL), as it had posted a revenue growth on a y-o-y basis for the first time in 8 years. The impressive thing is that it has maintained that feat by delivering good growth in Q1. Its share price took a good beating because the results fell short of Street expectations. But in spite of the fact that results were below expectations, I am highly confident about its growth trajectory.
Growth continues, but…
For the first quarter, total revenue grew 2% y-o-y as a result of a 9% increase in global advertising revenue. The company came back on display revenue growth with 6% growth in domestic display revenue and double-digit growth in international display revenues. Display is becoming a major venue of advertising for big companies, as it allows for maximum creativity in messaging at reasonable costs. As a result, large advertising giants like AOL, Inc. (NYSE:AOL) and Google Inc (NASDAQ:GOOG) are pumping up their video and mobile inventories.
Subscription revenue is a miss
While advertising revenue was a hit in this quarter, subscription revenue was a miss with a decline of 9% y-o-y. It is a fact that a major chunk of its revenue comes from the membership group wherein the main component is subscription services, but I am not that disappointed with a decline because I can see strong trends in play.
The decline in revenue has propelled AOL, Inc. (NYSE:AOL) to pack a host of new products into the offering with a motive to sell it more as a cluster of diverse products rather than just a service that gets people online. It is also worthwhile to note that ARPU increased by 7% to just over $19, which reflects adoption of price rationalization methods adopted by the management.
Good results bring joy
The highlight of the results were a growth in all advertising products, which led to a growth of 9% in global ad revenue. Advertisers are now using online media as a tool to build a brand rather than just a source to gain sales leads. As a result, these advertisers are willing to spend big bucks in display and related products that offer the freedom to create unique, long and interactive messaging in order to promote the brand. AOL, Inc. (NYSE:AOL) is doing a commendable job in capitalizing on such needs with its video and mobile solutions on the display front.