Though it's no longer a part of Time Warner, AOL is still serving America online. The Web portal serves users with an array of content and communication tools, including sites for news (TheHuffingtonPost.com), maps (MapQuest), entertainment (Moviephone), local information (Patch), and technology (Engadget and TechCrunch). AOL primarily earns revenues through display, search, and contextual advertising (AOL Advertising) sales. It sells ads on AOL Properties as well as its Third Party Network (third-party sites). Search is provided through a deal with Google. AOL still offers dial-up Internet access to 3.3 million subscribers in the US. Time Warner spun off AOL to shareholders at the tail end of 2009.
AOL Networks has advertising operations in the US, Canada, and Europe, as well as in Japan through a joint venture with Mitsui & Co., Ltd. AOL Networks segment also has an expanded global presence through its goviral operations, primarily in Europe.
AOL has three segments which includes the Brand Group, the Membership Group, and AOL Networks. The Brand Group segment include the performance of AOL’s advertising offerings on a number of owned and operated sites, such as AOL.com, The Huffington Post, Patch, TechCrunch and MapQuest. The Membership Group segment include AOL’s subscription offerings and advertising offerings on Membership Group properties, including communications products such as AOL Mail and AIM, as well as from performance compensation for marketing third party products and services. AOL Networks (formerly the Advertising.com Group) segment include the performance of Advertising.com, ADTECH, sponsored listings, Pictela, goviral and AOL On.
Sales and Marketing
In the online advertising and marketing services segment, AOL continues to trail its rivals, Google, Yahoo!, 24/7 Real Media, and Conversant.
The company's advertising strategy is to lessen the number of ads on AOL sites in order to reduce clutter on pages and make them load faster. It also offers premium advertising formats that focus on aesthetic quality, impact, and interactivity. In addition, it is growing its presence in the local online ad market by investing in its Patch Media service, which provides local information and services for towns and communities.
AOL itself reported advertising expenses of $85.8 million, $76.9 million, and $79.3 million for the years ended December 31, 2012, 2011, and 2010, respectively.
In fiscal 2012 the company reported a slight drop in annual revenue due to a more than 12% decline in its subscription sales caused by a decrease in the number of domestic AOL-brand access subscribers.
However, advertising sales were up by 8% in fiscal 2012 compared to the previous year driven by an increase in Third Party Network revenue (related to an increase in publishers on the network and increased sales of premium packages and video and due to acquisition of Ad.com Japan in 2012) and also due to an increase in search revenue (driven primarily by continued increases in search revenue on AOL.com of $34.5 million through the optimization of the consumer experience and due to increased queries from marketing related efforts).
AOL's net profit rose to $1.048 billion in fiscal 2012 from just over $13 million in fiscal 2011. The growth was mainly because of decreased expenses.
AOL's business strategy is focuses on showcasing original, advertising-supported content. Google powers AOL searches through a partnership that extends through 2015. As part of the agreement, Google also provides AOL with mobile search, and brings AOL's video content to Google's YouTube. In 2012 more than 15% of revenues came from Google, nearly all of which were search and contextual revenues generated on AOL Properties.
Mergers and Acquisitions
In 2012 AOL purchased an additional 3% interest in Ad.com Japan for approximately $1.2 million.
As part of its efforts to turn the business around while beefing up its ad-supported content holdings, AOL completed a major acquisition in 2011 when it purchased TheHuffingtonPost.com for $315 million in order to boost content and drive new users to its site. (TheHuffingtonPost.com includes coverage of news, politics, and entertainment topics, as well as celebrity blogs.) Before the deal, TheHuffingtonPost.com attracted around 25 million visitors each month, and together with AOL the two now attract about 110 million visitors.
After the TheHuffingtonPost.com acquisition closed, AOL laid off some 900 employees, representing about 20% of its total workforce. The cuts included 200 jobs in the US and 700 in India. (The Indian jobs consisted mostly of back-office support staff.) The reduction was designed to reduce redundancies between AOL and TheHuffingtonPost.com. AOL then created the Huffington Post Media Group to house its growing portfolio of online content and local businesses.