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AOL Climbs After Posting Profit on Higher Advertising Sales

AOL Inc. (AOL), the publisher of the Huffington Post and TechCrunch websites, gained the most in almost seven months after reporting a third-quarter profit amid stronger advertising sales.

The shares advanced 22 percent to $43.70 at the close in New York, the biggest daily increase since April 9. The stock has almost tripled this year, outperforming Yahoo Inc. (YHOO), Google Inc. (GOOG) and Apple Inc. (AAPL)

Since separating from Time Warner Inc. (TWX) in 2009, AOL under Chief Executive Officer Tim Armstrong has worked to transform the company from an Internet services provider into ad-based content provider. Global advertising rose 7 percent to $340 million in the quarter, AOL said.

“We have a lot more work to do,” Armstrong said in an interview after the earnings report. “We expect 2013 to be a growth year, both in terms of revenue and operating income.”

Net income totaled $20.8 million, or 22 cents a share, compared with a loss of $2.6 million, or 2 cents, a year earlier, the New York-based company said today in a statement. Excluding some items, profit was 34 cents, beating the 29-cent average of analysts’ estimates compiled by Bloomberg.

Total revenue was unchanged at $531.7 million, the first quarter since the spinoff that AOL didn’t post a year-over-year decline. Analysts projected $522 million, the average of estimates compiled by Bloomberg.

Search advertising increased 7.9 percent to $91.8 million, according to the statement. AOL’s advertising network surged 18 percent to $112.8 million. Display advertising fell 1 percent to $135.4 million. International display ads advanced 18 percent, offsetting a 2.6 percent drop in the U.S. portion.

AOL’s U.S. advertising business ranks fifth among major competitors behind Google, Yahoo, Facebook Inc. and Microsoft Corp., according to research firm EMarketer Inc.

Patch Readership

The company is going through a lengthy turnaround phase and continues to see lower revenue as its legacy dial-up business loses customers to faster broadband connections offered by cable companies. Sales from dial-up fell 10 percent to $173.5 million.

Armstrong has invested more than $600 million in Web publishing, acquiring the Huffington Post last year for $315 million and spending more than $300 million to develop Patch, a local-news division that Armstrong said should bring in about $50 million in sales this year.

Traffic at its Patch division increased 19 percent in September compared with year earlier, AOL said. Total readership to AOL’s properties grew 4 percent to 111 million people in the quarter.

To contact the reporter on this story: Edmund Lee in New York at elee310@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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