IAC, AOL rebound in online ads

Display ad revenue will likely return to growth in Q1 of 2011

NEW YORK -- Amid a strengthening TV advertising market, Wednesday's quarterly earnings reports from Web media companies IAC and AOL Inc. also highlighted a rebound in online ads.

Barry Diller's IAC posted a narrowed first-quarter loss as online ads showed signs of life and helped revenue rise 16% to $385.9 million, handily beating Wall Street estimates.

At its core search business, which includes Ask.com and Citysearch, that make money from advertising, revenue increased 20% over the year-ago period to $199 million.

Throughout most of 2009, search revenue was down before IAC posted a slight 3% gain in the fourth quarter and took a $991.9 million impairment charge to write down the value of its search business.

But management on a conference call cautioned that ad sales growth in the current month has been below the first quarter.

Meanwhile, AOL on Wednesday reported a first-quarter ad revenue drop of 28% to $282.7 million, which was worse than its 19% overall revenue decline.

But chairman and CEO Tim Armstrong said the declines came due to AOL's recent ad salesforce restructuring. Underlying ad demand though is solid, including in key categories, such as auto, consumer packaged goods and financial services.

"There is no demand problem," Armstrong said on a conference call. "While our restructuring had an impact on first-quarter advertising results, we are encouraged by the advertising market's recent strength."

Sales staff not affected by the restructuring was generally up 100% year-over-year, he said.

But given the reorganization, the key U.S. display ad revenue will likely only return to growth in the first quarter of 2011, management said.

Jefferies & Co. analyst Youssef Squali said challenges from the ad reorganization are "likely to persist for one or two more quarters, causing the company to trail the secular recovery in display advertising most of its competitors are seeing."
comments powered by Disqus