AOL Has A Profitable Mobile Business, But It's Not Because Of Apps Or Ads

AOL (NYSE: AOL) has banked a lot of its fortunes on selling advertising around a group of high-traffic web properties. But just as it still derives a large part of its online revenues from its legacy internet access business, in mobile it has a legacy business to thank for its fortunes — for now, at least.

David Temkin, the head of mobile for AOL, told paidContent that mobile ads running on AOL’s 30 free apps and 20 mobile web sites do not yet pay the way for these mobile content forays. But mobile is still profitable anyway, because of AOL has a number of deals with carriers in the U.S., signed years ago, to link up its AIM instant messenger service with the carriers’ text messaging services.

The deals were done years ago, at a time when SMS was still a little-used service and AIM was very popular. “The carriers wanted to incentivize their audience to send text messages, so they tied it up with AIM,” he said. “We still get a cut from that.” Like access, these revenues are on the decline, but for now they actually bring AOL’s mobile operation into the black.

Yet even if mobile ads have not been profitable up to now, Temkin — who spoke to paidContent in a fireside chat as part of Internet Week in London — said he thought they would become so by 2012.

Why? Because advertisers are becoming more accustomed to working in the format. And AOL itself is getting its ducks in a row: the company, said Temkin, has just recently introduced a system where advertisers can buy integrated campaigns across AOL’s online and mobile sites. (Previously, the process was significantly more complicated: online and mobile were booked separately, with mobile separating into buys for different platforms.)

Apps have been the big breakthrough for mobile content in the past few years, are they proving to be a hugely sticky service for AOL. Temkin noted, for example, that the mobile app for the popular tech site Engadget in fact had more views of its iPhone app than it did of its main web site — and that’s before you even factor in Android app views, he said.

In the course of our conversation, Temkin also talked about where he sees the future for AOL’s mobile efforts: more apps, sure, and more “mobile-first” efforts — but necessarily not straight content plays.

Temkin’s goal, he says, is to be to create more services along the lines of Editions (AOL’s news aggregating app), which help people improve their experience with third-party content. Putting technology and experience before (or at least alongside) content is not too surprising coming from the mouth of Temkin, who joined AOL from Palm (NYSE: HPQ), where he had been the VP, developer platform, for webOS.

For now these will be ad-funded and free, but what about the future? Charging for content isn’t a plan for now, he said, “but I wouldn’t say we’re never going to do that.”

Watch the video below for the full interview.