AOL Sees Q2 Revenue Drop as Restructuring Continues

As summer slowly turns to fall, it appears the weather isn’t the only thing expected to cool down. AOL, the online media giant, has seen a 17% drop in total online ad revenue, according to recent 2010, second quarter reports.

In fact, as seen from the view of CEO Tim Armstrong, it looks like they haven’t hit bottom yet. I’m sure Wall Street loves this.

It’s about taking a company that was very sick and making it healthy,” Armstrong said, suggesting that much has changed in the past year. “This is the first quarter in Q2 where we were able to start playing some offense as a company.”

Most investors attribute the losses to the company’s restructuring process…including reducing inventory and shutting down global operations.

A few things to note pertaining to the recent drop in Q2 revenue:

• Overall advertising plunged 27% from Q2 in 2009 to 2010.
• During the same time international ad sales took a flying leap…with a 52% drop. The company also pointed out this was due to their plan to reduce global operations.
• Domestic display ads fell 7% (not such a bad number considering the alternative)
• Total display revenues dropped 13% or 17 million.

Even though these numbers are not what investors wanted to hear, most AOL executives attribute this to the overall plan to cut the pork out of what some have called a “failing company.”

In some ways, AOL is following directly into the path of Yahoo – i.e, looking for premium ad dollars vs. relying on large quantities of cheaper advertisers.

Armstrong also noted 60% of its homepage campaigns have come from what he deemed as premium advertisers…vs. 40% in Q2 of 2009.

Yes, the numbers are bleak. They suck actually…to put in bluntly. So, when does the rebound begin? Such as maybe a few mergers and acquisitions? On a recent conference call to investors, he Armstrong gave the following response:

I think we are a build-first company in terms of trying to build things ourselves. I think we will do more M&A activity as we go forward, but I think it will be very targeted and tuck-in-level in the areas that we see successful, with the goal being consumer growth and advertiser growth in general.
One of the best things that happened at the company, actually, is that we are very connected to the startup community now, which we weren’t a year ago. We are very active in the AOL Ventures area, as well as very active in constantly discussing partnerships.

I doubt that really clears anything up. What AOL really needs to do is finish up their downsizing and get back to their “bread and butter.” Start utilizing the ad marketplace by beefing up Advertising.com.
It’s the advertising stupid!