AOL's Quarterly Earnings: Dialup and Advertising

As covered on TechCrunch, AOL's earnings beat analyst estimates today, coming in at $.035 per share, with a total income of $28.5M on a revenue of $540M.

Before we all pop the champagne, however, let's take a look at the actual numbers:

Of the $541M in revenue, $361.2 comes from advertising, or almost precisely 2/3 of all revenue. Further, an entire $166M comes from subscriptions, which is codeword for dial up subscribers. That's right, a full 30.6% of AOL's quarterly revenue comes from people with dial up modems. So, AOL generated 97.6% of its Q2 income from advertising and dialup. That means that all of AOL's other products, besides advertising and dialup, account for less than 3% of its income. That is not a good sign.

To be fair, AOL has many services that are advertising driven, so there are many different products that generate ad revenue. However, given that the cost of online ads is declining, affecting mega-giants like Google, it may be that services driven by online ads don't look to be long-term sustainable, and it appears that AOL's only way of generating revenue from its online properties is from advertising. It goes without saying that dialup subscriptions are not a long term plan.

Time for AOL to start diversifying its income streams.


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