AOL Still Relies on Dial-Up Profit as Its Media Shift Continues

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AOL's old dial-up business still provides the vast majority of the company's profits, giving the company a runway to shift its strategy.

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By Jason Abbruzzese2014-05-07 12:52:38 UTC

AOL has worked hard to reinvent itself as a modern digital media and advertising company, but the bulk of its profits still come from its dial-up ISP business.

On Wednesday morning, the company reported first-quarter earnings of $583 million in revenue, slightly higher than expected. Profit missed analyst estimates at $0.34 per share.

See also: The Rise and Fall of AIM, the Breakthrough AOL Never Wanted

"Membership," the area under which AOL's declining—but still lucrative—dial-up ISP business falls, generated $138 million in profit. That helped offset losses in other areas, including its AOL Platforms advertising business, which lost $3.5 million.

Also notable is that AOL's brand group, which includes the Huffington Post, turned a profit of $1.8 million after losing $4.9 million in the first quarter of 2013.

The legacy ISP income is providing AOL with a significant runway for the company to change its business. Membership is almost free money for the company — $196 million in revenue ends up as $138 million in profit — but is going to continue its decline, albeit at a shockingly slow pace. Membership group revenue fell only 7% in the year.

Meanwhile, AOL has grown its Brand Group and Platforms group to account for a major percentage of its revenue. AOL Platforms generated 43% more money in the first quarter of 2014 than it did in the same period last year.

Revenue for the Brand Group fell, but AOL pointed to the loss of its local news network Patch as the reason. The lose of that business, which never turned profitable, helps explain how the group turned a profit.

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Topics: Advertising, AOL, Business, earnings, Media