AOL losses continue, but there is a silver lining in video - maybe

The bleeding continues at AOL, but there are signs, albeit small ones, that CEO Tim Armstrong's turnaround is finally gaining some traction. The company today said revenue for the first quarter declined 17 percent to $551.4 million from $664.3 million a year ago. Income also fell, tumbling 86 percent to $4.7 million, or 4 cents per share, from $34.7 million, or 39 cents per share in the first quarter of 2010.

quarterly revenue report - aol q1 2011

Click here to view a larger version of this chart.

"The first quarter beat expectations for where we thought we would end up," Armstrong said during an earnings call this morning, adding that the company successfully cut cost structure and bureaucracy, and "became lighter, faster and stronger."

"On a strategic level, that moves us forward as a business," he said.

Global display revenue grew 4 percent for the quarter, the first year-over-year growth since the fourth quarter of 2007. During last quarter's earnings call, the company said it was "hopeful" that it would begin to see a display turnaround. Domestic display, meanwhile, was up 11 percent or 6 percent excluding acquisitions. Advertising revenue was essentially flat, with declines in search and contextual revenue, partially offset by growth in display revenue and increases in Third Party Network revenue.

AOL also continues to grow video views, moving into second place on comScore in March, and it continued to add depth and content to its portfolio.

"We put major investments into things like video," Armstrong said. "We're now the No. 2 video player on the web now after YouTube... Two years ago, AOL was nowhere on the web."

"In-house video production "is something we continue to work on," said Armstrong, with plans to increase the amount of video on Huffington Post and Patch websites. "I'd expect massive scale on the network side of the video business for us overall," he added.

Armstrong also said monetizing content--especially video content--would continue to be a major focus.

"Content profitability is a North Star goal for us," said Armstrong. "It comes down to a simple formula... you've got to turn it from red to green. The reds are going down, the greens are going up."

Unfortunately, subscriber revenues declined 24 percent, but AOL said it reduced churn--from 3 percent to 2.5 percent per month--which mitigates that somewhat as AOL continues to get sticky with subscribers.

On other topics, Armstrong said the company's Devil ad initiative was seeing excellent results with Devil ads seeing better metrics than other Internet ads. "That's a substantial lift for us as a business," with additional profitability, Armstrong said. "The interest rate is really high on Devil. From the advertising side, it's gotten a lot of traction."

Armstrong also pointed out that the integration of Huffington Post was the "fastest, best integration of any property I've been at. Sixty days after agreeing to deal, the companies are completely integrated." The Huffington Post, he said, has seen 30 percent growth in the first quarter.

For more:
- see this earnings pdf

Related articles:
AOL beats analyst 4Q expectations; plans continued online video push
AOL signs content deal with Queen Latifah
AOL teams with 'Survivor's' Burnett for series
AOL signs content deal with Heidi Klum, Full Picture Entertainment
AOL's David Eun on the 5min Media acquisition