AOL shows signs of revival on advertising growth

AOL is showing signs of revival with gains in advertising, a key step toward the reinvention of the former Internet star as a media firm.

AOL said Friday profits in the fourth quarter jumped 57 percent from a year earlier to $35.7 million, led by a rise in ad revenues.

Total revenues were up four percent from a year earlier to $599.5 million, in what the company said was the first time revenue had increased year-over-year in eight years.

The growth was led by advertising, which saw a 13 percent jump in revenue.

"AOL returned to growth and generated significant value for shareholders in 2012," Tim Armstrong, the firm's chairman and chief executive, said in a statement.

"AOL has strong momentum entering 2013 and is positioned to continue on our growth path by executing our strategy to build the next generation media and technology company."

AOL, formerly known as America Online, has been struggling since the collapse of its leadership as an Internet subscription service, and has been seeking to become a more diversified Web firm.

It fused with news and entertainment giant Time Warner in 2001 at the height of the dotcom boom in what is considered one of the most disastrous mergers ever.

It was spun off by Time Warner in December 2009 into an independent company and has been struggling since then as it tries to focus on media and news.

Its operations include the Huffington Post news site, technology news site TechCrunch, the local news operation Patch, Moviefone and Games.com.

AOL shares leapt 7.3 percent to close at $33.72.

Victor Anthony at Topeka Capital Markers said the shares may "react positively off the headline revenue outperformance" and profit growth, but added that "we would have liked to see growth in domestic display (advertising) as evidence that AOL can fully compete with Google and Facebook."

Anthony added that a spinoff of the struggling Internet access arm called AOL Networks "would be a catalyst."

Youssef Squali at Cantor Fitzgerald was cautious, maintaining a "hold" rating on AOL.

He said the better-than-expected gains show that AOL is "slowly moving back to growth mode again" but added that "management shied away from providing revenue guidance or quantifying margin improvement potential for 2013."

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