Business

Video ads are paying off for AOL. Patch, not so much.

AOL had both good and bad news to share with investors today, showing that one big gamble paid off while another one continues to drag the company down.

AOL showed that its premium advertising business, specifically for video ads, is growing at a healthy pace within its third quarter earnings report today. That’s great news for AOL chief executive Tim Armstrong, who last quarter decided to spend $405 million to buy video ad-tech startup Adap.tv — the company’s biggest acquisition under Armstrong to date. The company’s revenues were up 6 percent compared to the same period last year to $561 million.

But there was one thing weighing down the company from making significant gains in profit for the quarter. That thing was Armstrong’s last big gamble — the local news platform Patch. AOL reported that it took a pre-tax restructuring charge of $19 million and an impairment charge of $25 million due to Patch, which its all but gutted to regain some of its momentum in its overall revenue. Back in August Patch notified employees that it was cutting about 500 positions, and would shut down some of its community sites. This comes despite Armstrong dumping over $150 million into the platform to make it profitable.

The biggest problem with Patch seemed on the outside that AOL has simply failed at the business of selling local advertising, but I think it has far more to do with the platform’s “one-size fits all” approach. You may be able to successfully build a local news site that could replace the dying print publications in lucrative local areas. But the local papers Patch was intended to replace were all their own businesses, each with their own business models unique to the area. Duplicating that part, as we’re seeing, is much harder — especially when it comes to Patch.

Check out the full Q3 2013 earnings report for more details on how the company did over the last 90 days.

More information:

Having helped millions of Americans to get online, AOL Inc. (NYSE: AOL) is on a mission to inform, entertain and connect the world. The home of a world class collection of premium brands, AOL creates original content that engages audie... read more »

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