tim_armstrong_1

Asa Mathat

Media


AOL beat Wall Street’s Q2 revenue and profit numbers. And, like the last few quarters, the company says that its content business — sites like Huffington Post and TechCrunch — was profitable, if you’re willing to accept a fuzzy definition of profit.

But as always, the most amazing thing about AOL’s business is the thing that drives AOL’s business: Millions of people, who started paying the company a monthly fee for Internet access more than a decade ago, who continue to pay the company a monthly fee for Internet access, even though they likely aren’t getting Internet access from AOL anymore.

AOL doesn’t break out precise earnings numbers for this business, but it gives you enough hints to understand that it’s enormously profitable. As it should be!

Tim Armstrong’s company says its subscription business generated $143 million in “Adjusted OIBDA” – its proxy for operating income — last quarter. That’s more than the $121 million in Adjusted OIBDA that the entire company generated.

Here’s how it makes that money: Getting a shrinking number of subscribers — 2.34 million this quarter, down from 3.62 million at the beginning of 2011 — to pay an increasing amount — the average AOL subscriber now pays $20.86 per month, up from around $18 a few years ago.

I’d like to say I can’t believe this is real. But then again, I’m the guy who still pays Netflix for a DVD subscription, and I haven’t played a DVD in years.

AOL Q2 Subscriber




5 comments
whalewriter
whalewriter

Say, have any of you actually looked at the AOL interface?

I used to scoff at my husband using AOL (don't get me wrong, I won't allow him to load it on my travel laptop or desktop) but there are some features that are useful. For instance, it operates as an online and local email client, which is handy if you want to save your messages ... in other words, for those of us who actually still use "hard copy" to prove we paid something. I use it as a secondary email address for authentication.

The user interface is hard to beat, for folks who simply do not want to become hobbyist nerds or rely on someone else to fix their problems. True, the included antivirus software has issues, but an automatic scan each morning keeps his machine clean. So far, I've not found conflicts with some of the other tools I have installed.

We have cable, but have used dial-up in emergencies. We also have used DSL in another remote location we sometimes call home, and his email follows him everywhere.

Our technology is not the newest and greatest, but the trade-off is, we get to live in a beautiful rural area with clean air and water, million-dollar views of mountains and saltwater, a year-round creek to lull us to sleep at night, and a community beach with fresh oysters & clams. With the money we have saved on gadgets, I bought a wetsuit so I can go swimming year-round. Nice trade-offs, although (like AOL) not for everyone.

elio_enidias
elio_enidias

So AOL is making money on ads, but Yahoo's ad revenue is declining. Still think Marissa is worth $100M?

Marc (DarcFlii LLC)
Marc (DarcFlii LLC)

Not surprising at all.


1) Some people aren't technologically inclined nor care. There are millions of Americans still using non-smart phones


2) Broadband RJ-45 connections aren't everywhere.  RJ-11 connection are.


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