AOL Plans Shut Down More Underperforming

CFO tells analysts Internet media company will focus on high-growth areas, including video

AOL shut down several unprofitable music websites last month — and the Internet media company isn’t done pruning the dead wood from its portfolio, chief financial officer Karen Dykstra told Wall Street analysts.

“We have so much opportunity at AOL,” she said. “We have to be extremely tough on those things that are not where we wanted them to be at this point — we are considering doing a number of staged slowdowns.”

Dykstra did not identify which other AOL properties are being eyed for the chopping block, saying the company has not made any definite decisions but that “there will be more to come.” She said the company will focus on sectors including video; news sites like Huffington Post; and tech, which include TechCrunch and Engadget.

AOL Music, which shut down April 26 and was accompanied by staff layoffs, “was losing market share, not profitable… other properties we have are very high growth and very high potential,” Dykstra said. “We are just rigorously reviewing every expense line, every product line. These are difficult decisions, but they’re all around driving profitability.”

Overall, AOL posted first-quarter 2013 revenue of $538.3 million, up 2% year over year, and net income attributable to AOL increased 23%, to $25.9 million. The company reported an 8% increase in display advertising, but revenue from dial-up Internet access — the only unit that contributed operating income in the period — dropped 8%, to $165.8 million. AOL shares dropped more than 10% in early trading Wednesday.

AOL topper Tim Armstrong talked up the company’s video strategy on the call with analysts. He called out its Digital Content NewFronts presentation last week during which AOL presented a slate of 15 new original shows, which include productions with celebs Sarah Jessica Parker, Hank Azaria, Nicole Richie and Gwyneth Paltrow.

The company now serves 800 million video views per month. “AOL was not a player in video three years ago,” he said. “And we are a player today, and we plan on being a bigger player in the future.”

To Armstrong, even sexier than new content from stars like Paltrow is AOL’s new partnership with FreeWheel and Mediaocean on a system designed to let media buyers directly buy AOL premium video ad inventory from existing TV buying workflow and systems.

Armstrong said he visited several large advertiser clients in the past week to discuss video. “All of them are not just planning but moving TV dollars [to Internet video],” he claimed, although he acknowledged that TV ad money is only slowly coming to digital today. “I would expect 2014 to be a really big year for video.”

AOL’s websites span multiple categories. In addition to AOL On video network, HuffPost, TechCrunch and Engadget, brands include:  Moviefone; AOL Autos and Autoblog; Cambio, a teen-focused celeb news site; DailyFinance; sites focused on U.S. government, defense and energy news; Homesessive.com; Games.com; AOL Jobs listings; AOL Real Estate; and AOL Travel ecommerce site.

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