AOL Inc. (AOL) reported its financial for the fourth quarter and full year 2012 Friday morning, surpassing analyst expectations for revenue as more people used their search function and paid for advertising while falling subscription revenue slowed its tumble. Meanwhile, the board at AOL approved a healthy stock buy-back program.
The company said that revenue during the fourth quarter totaled $599.5 million, an increase of 4 percent versus $577 million in the fourth quarter of 2011. It was the best quarter of revenue growth for the New York City-based Internet company in eight years. Net income climbed to $35.7 million, or 41 cents per share, from $22.8 million, or 23 cents per share, in the year prior quarter.
Analysts were expecting earnings per share of 41 cents on revenue of $573.7 million.
AOL registered a 13 percent rise in advertising revenue to $410.6 million, an important barometer of growth as it shifts away from legacy subscription-based dial-up services from its grass roots in the 1990’s to focus on media properties. It was the seventh consecutive quarter of increasing ad revenue for AOL. At this time, though, the dial-up services still drive the majority of profits for the company.
Search ads, which AOL offers in concert with Google, Inc. (GOOG), advanced to $103.6 million, representing about one-quarter of all ad revenue and a 17 percent increase over the year prior quarter. Ads from AOL-branded partners like the Huffington Post, Patch and parenting.com, generated $137.2 million in sales, 31 percent better than last year’s fourth quarter.
At $169.8 million, global display ads were flat compared to the fourth quarter of 2011.
“AOL returned to growth and generated significant value for shareholders in 2012,” said Tim Armstrong, Chairman and CEO in a statement today. “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.”
The strength in earnings is a good, early sign as the company continues to reconfigure itself as a player in the online media space. AOL renamed its Advertising.com Group to AOL Networks in an effort to better align its offerings with its parent brand, dumped businesses such as hipster.com that don’t fit its business model and said that it is buying tech blog Gdgt to join its other popular tech sites like Engadget and TechCrunch.
Shares have sizzled ahead in early trading, including an upward gap to $34.20 from Thursday’s close of $31.41. Less than an hour into Friday’s trading, shares are ahead more than 12 percent at $35.25, adding to a move that has seen shares rise about 120 percent in the past year.
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