AOL revenues climb 7% to $625.1M on strength of video advertising, programmatic strategy

AOL's mobile-focused video play is picking up steam as its double-digit growth in premium advertising sales helped the company beat analyst estimates, reporting $625.1 million in revenues in the first quarter of 2015, a 7 percent climb, and adjusted earnings per share of 34 cents.

The company told investors on an earnings call Friday that its video views grew 100 percent year over year, and that revenue from its programmatic (automated ad sales) grew 80 percent in the same time frame.

"We saw a 38 percent increase in the number of the top 100 accounts buying both video and programmatic," said Tim Armstrong, chairman and CEO. "AOL Platforms overall grew revenue at 21 percent year-over-year and our ad pricing grew at double digits across both our owned and operated properties and publisher properties."

While AOL still pulls in revenue from other areas, including ads on third-party sites, search, and believe it or not, revenue from the 2 million or so people who still subscribe to its $20 per month dial-up service, programmatic has become its go-to revenue source. The company launched ONE, a programmatic platform, in April. In February, AOL laid off 150 staff, most of whom were in its sales department, citing the growth of automated ad buying and selling as making their jobs redundant.

Mobile is increasingly becoming a part of the company's ad revenues. Armstrong noted that 60 percent of AOL's users now access its content with a mobile device.

When asked by Jeffries analyst Brian Pitz why that category has only been monetized by a single-digit percentage, Armstrong took a holistic view, saying that "monetization catch-up is going to come from cross-screen targeting." More than half of the ad campaigns on AOL's platforms are "cross-device," he said, adding that the company's focus is to "stay with a consumer across all their devices."

He added that AOL's mobile revenue growth is 103 or 104 percent.

Armstrong is certainly confident in the potential growth of AOL's video business, but can the company take on staunch competition from Yahoo, Google's YouTube and Facebook? The latter two hold the lion's share of ad revenue worldwide, Business Insider noted. But with its original content investment--the company is growing the amount of original online video from 80 pieces in 2014 to over 3,600 this year--AOL may have the edge it needs to land in the top 3 for advertising revenues, the article said.

"Video clearly represents the future of digital content consumption and distribution, and it is an area where AOL has had great success and is investing to extend its lead," said Karen Dykstra, EVP and chief financial and administration officer for AOL, said on the investor call.

AOL's closing price on the NYSE was $43.42, up 10.23 percent or $4.03, in Friday trading.

For more:
- see the investor page
- Seeking Alpha has this transcript
- CNET has this article
- Business Insider has this story

Earnings Summary: Sizing up pay-TV earnings for the first quarter of 2015

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