AOL’s Display Turnaround Continues, Net Loss Slims

AOL’s display advertising turnaround appears to be taking shape, as Q2 numbers showed that segment up 14 percent globally. Meanwhile, the U.S. display dollars were up 16 percent. The growth was even stronger in AOL’s ad-network business. There was a 29 percent jump in third-party network revenues, which includes a 15 percent rise in the AOL’s ad network,, as well as a boost from the DIY video network the company acquired last year, 5Min. But there is still tremendous strain on AOL’s ability to make it all profitable, as the string of net losses continued.

Compared to Q210, when AOL (NYSE: AOL) posted a net loss of $1 billion, this past quarter’s $11.8 million loss certainly sounds like something of a victory. Plus, with total advertising up 5 percent, versus the $111.9 million decline that segment was hit with the same period last year, CEO Tim Armstrong can claim some vindication regarding the series of shuffles and reorganizations of the ad sales and content staff over the past several months.

And given that things were moving in the right direction, it makes the circumstances around the departure of Jeff Levick, the AOL global ad chief that Armstrong brought with him from Google (NSDQ: GOOG) two years ago, all the more curious.

As AOL says in its earnings release, the premium ad format platform that Levick pursued, Project Devil, saw ad impressions served and the number of third party grow more than 100 percent since Q1. Still, the greatest success appeared to be on the third party network side, which is run by Ned Brody, the head of the Group, who was named AOL’s chief revenue officer, a new post, in conjunction with Levick’s exit, suggesting that this is where AOL sees the power in driving ad revenues and erasing those net losses faster.

Other highlights from AOL’s Q2:

— This was the first time since global ad revenue has grown since Q2 2008
— Subscription revenue declines — AOL is still trying to wean itself off its traditional dial-up ISP dollars — reflect a 21 percent decline in access subscribers year-over-year, while monthly average churn of 2.2 percent is generally not to bad for a business its trying to get out of.
— Hyperlocal network Patch, which is one of the major bets Armstrong has made since arriving at AOL, has added 44 towns to end Q2 in 846 towns and is on track to have about a 1,000 coverage areas by year’s end.
— The net loss was partially attributed to spending on increased resources in Patch as well as “other strategic” investments.
— AOL presented a $10.2 million increase in incentive compensation related to acquisitions made in 2010 and 2011, which included Techcrunch, 5Min, video producer StudioNow, video distributor goviral, display ad tools provider Pictela, hyperlocal aggregator and, most notably, The Huffington Post.

In the meantime, AOL will likely highlight recent developments such as the hiring of former OWN (NSDQ: DISCA) Network CEO Christina Norman to edit the revamped Black Voices site as well as oversee AOL’s video programming efforts, as well as the release of AOL Editions, its iPad news magazine, which appeared a bit buggy when first issued.