By Steven Overly
Thursday, February 3, 2011; A14
Once-dominant Internet company AOL underwent major changes in 2010 as a largely new leadership team shed jobs, sold off old assets and acquired new ones in an attempt to place greater emphasis on the company's advertising and media business. The upheaval was evident in its annual earnings.
The New York-based company posted a net loss of $782.5 million, or $7.42 per diluted share, for 2010, compared with a profit of $248.8 million the year before. Total revenue slid 26 percent from $3.2 billion in 2009 to $2.4 billion last year.
Financial results for the fourth quarter painted a brighter picture, with a profit of $66.2 million, or 60 cents per diluted share. That bested Thomson Reuters analysts' estimates of 46 cents per diluted share.
During a conference call Wednesday morning, AOL chief executive Tim Armstrong reiterated his position that "2011 is the year we stop working on the turnaround and start working on the comeback."
Once the gateway to the Web for many Americans, AOL has been repositioning itself as a major creator of online content and seller of advertising since it broke from parent company Time Warner in December 2009. To that end, the company's decision had a significant impact on its bottom line in 2010.
Advertising revenue was hurt by a period amid the transformation in which many employees were let go and others left, opting to start their own ventures or join other tech firms. The company also pulled out of markets such as France and Germany, where executives said they were losing money.
AOL also sold social networking company Bebo for much less than its purchase price and let go of its long-held ICQ instant-messaging platform. Locally, it also sold about half of its sprawling campus in Dulles. Those sales gave the company cash to purchase technology blog TechCrunch, video distribution company 5min Media and social media company Thing Labs.
Patch.com, AOL's network of local news Web sites, grew to 775 outlets, a pace that executives said was quicker, and thus more costly, than expected. Nonetheless, Armstrong said Patch should aid the company's strategy to grow its Web traffic, increase display advertising revenue and expand local coverage. He declined to provide the network's current revenue or a clear timeline for profitability.
"My guess is by the end of this year, we will give you guys much more transparency around Patch," Armstrong told industry analysts. "And the reason I'm not giving you transparency around Patch is I don't want to. You're going to have to trust me on this."
Armstrong reiterated that he expects the company's budget sheets to catch up with its change in direction in the second half of 2011, saying his goal is to have display advertising on par with the industry average at that time. For 2010, total display advertising revenue was $151 million, down 14 percent from the year before.
"There's a lot of stuff that we went through that I don't think businesses could handle in multiple years that we did in one year," he said. "I think you're going to see us continue to push and push and push. . . . We are going to do everything we can to make AOL the successful company it can be."