Revisiting AOL - Profits down 90% in Just Two Years

Last August I wrote this post:
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.
Just to review, AOL defines "subscribers" in its 10K as:

As of December 31, 2013, we had approximately 2.5 million domestic AOL subscribers. Our subscribers are important users of Brand Group and Membership Group properties and engaging our subscribers, as well as former AOL subscribers who continue to utilize our free service plan, is an important component of our strategy. Our paid subscription plans provide bundles of products and services ranging from online storage, privacy and security solutions to technical support, back-up and unlimited dial-up internet access options, computer protection and partner discounts.

Today, Ars Technica has the headline: In one short year, AOL’s quarterly profits plunged 66 percent.

According to their 10K:

This decline has been the result of several factors, including the increased availability of high-speed internet broadband connections and attractive bundled offerings by such broadband providers, the fact that a significant amount of online content, products and services has been optimized for use with broadband internet connections and the effects of our strategic shift to focus on generating advertising revenues, which resulted in us essentially eliminating our marketing efforts for our subscription access services and the free availability of the vast majority of our content, products and services. Although we provide many additional products and services as part of our subscription plans, there can be no assurance that our subscribers will value the bundle of services we offer and they may cancel their subscriptions at any time. If any of these factors result in our Subscriber base declining faster than we currently anticipate, our subscription and advertising revenues could be adversely affected.
Here's the year-over-year:

Not looking so hot for AOL.


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