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Investors Cold To Latest AOL Re-Shuffle

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How long before investors lose patience with AOL (NYSE: AOL) CEO Tim Armstrong? The former Google (NSDQ: GOOG) ad executive assumed control of the struggling internet company over two years ago, successfully spun it off from Time Warner (NYSE: TWX) a year later, and has been repeating his turnaround mantra ever since. Over that time, the company has gone through a number of strategic and personnel changes, including the $315 million purchase of the Huffington Post earlier this year. With earnings due soon, Armstrong announced another executive shakeup — but investors weren’t impressed, sending the company’s shares down over 2.6 percent.

Armstrong can take some comfort knowing that AOL’s largest individual shareholder continues to back the turnaround. That shareholder, of course, is Armstrong himself — in a vote of confidence he poured another $10 million into the company in February. Armstrong owns just over 1 million shares, or about 1 percent of the company.

To his credit, Armstrong has made some progress in his mission. Although AOL continued to lose money in the first quarter, display revenue grew 4 percent globally and 11 percent in the U.S, the first time the company reported positive display numbers since 2007. That’s important because Armstrong has made display advertising a linchpin of the company’s turnaround plan.

The CEO continues to maintain that the turnaround is on track (“The future for AOL is getting brighter and we are on the path of returning AOL to growth.”) If so, why the executive shuffle? Why did Armstrong oust ad sales head and former Google colleague Jeff Levick and name Ned Brody as AOL’s chief revenue officer, a brand new post? Armstrong told paidContent Editor Staci D. Kramer in an interview today that the company continues to make progress and that the changes were to make it run more smoothly.

It’s just the latest shakeup at AOL. Last month the company folded 53 AOL sites into 20 “super-brands” in an effort to streamline operations, and improve the company’s “focus.” At that time, Armstrong announced that Patch CEO and co-founder Jon Brod would give up his title as COO of the Huffington Post Media Group to focus on AOL’s local efforts, including Patch.

Investors will be particularly interested in the Q2 earnings due August 9 — it’s the first full quarter with the Huffington Post in the corporate fold. The news and entertainment website has already absorbed several of AOL’s content properties and is hiring professional journalists in addition to its stable of some 10,000 unpaid bloggers. The company is spending more than $160 million on its Patch local news initiative, but those efforts have yet to pay off.

Wall Street analysts remain skeptical: AOL shares have fallen 20 percent since the Huffington Post acquisition, and institutional investors shed some 13 million shares according to the most recent quarterly data. AOL execs, meanwhile, have warned investors not to expect anything too spectacular in the Q2 report.

Here’s is how AOL stacks up compared to some of its competitors by unique monthly visitors and market capitalization.

1. Google sites: 182,537,000, $200 billion
2. Yahoo (NSDQ: YHOO) sites: 178,383,000, $17.9 billion
3. Microsoft (NSDQ: MSFT) sites: 173,562,000, $234 billion
4. Facebook: 160,879,000, $73 billion (SharesPost secondary market)
5. AOL, Inc: 110,447,000, $2 billion

According to comScore (NSDQ: SCOR), Google’s Ad Network reached 92.8 percent of Americans online in June, followed by Yahoo’s Network Plus (86.3 percent), AOL Advertising (85.9 percent), Yahoo! Sites (83.2 percent) and Google (82.2).

Source: comScore Top 50 U.S. Properties June 2011 (.pdf)