AOL Is Still the Weirdest Successful Tech Company in America

[obituary_latte]

I'm pretty sure a good chunk of their profits are coming from people who have gone years without realizing they can cancel their "AOL" and still have access to the internet via the DSL/Cable they are paying the phone/cable company for.

I've seen this many, many times.

[pessimizer]

People are still leasing telephones from AT&T apparently: http://www.kirotv.com/news/news/thousands-racked-up-in-forgo...

[colkassad]

I don't know...this sounds apocryphal. I've seen the occasional AOL email address but I've haven't seen anyone claim they use AOL for internet in years.

[igravious]

So basically technically illiterate people are subsidizing Engadget and Huffing Post and a bunch of others. I should send my résumé over while the gravy train is chugging along.

[adregan]

I just explained this to my aunt and uncle who have been paying for AOL for 18 months because they thought they'd have to have their AT&T service setup again.

[badgar]

The last I've heard of this was 2 years ago, an article in the New Yorker: http://www.newyorker.com/reporting/2011/01/24/110124fa_fact_...

At that point, it was ~40% of revenue and ~80% of profits from subscribers. Apparently they've gone nowhere, fast.

[untog]

This is what makes stuff like closing AOL Music even sadder- AOL is in a really weird position where they're making a ton of money where they shouldn't be- they are in a prime position to do some really interesting things on the net. But they don't.

[ryguytilidie]

It's actually pretty much the main problem with capitalism. Innovation often drives prices down, and prices going down means less profit, so at a point, there is an absolute disincentive to innovate. Obviously in theory people would leave the inferior product, but that is clearly not the case in situations like this.

[nwzpaperman]

AOL has bet the future on Patch.com or at least that's how it looks with Armstrong riding nine figure losses and hanging on to the shiny sheriff's badge over there for another platform pivot!

You should have an asterix next to "making a ton of money."

*Past performance is not indicative of future results!

[nathan_long]

>> [dialup subscriptions] plus revenue associated with services like AIM, accounts for more than 100 percent of the company's profit

More than 100 percent of its profits? Can someone explain that to me?

[joshdick]

It's because the other part of their business, media and advertising, loses money, as the article states.

If you make $168M from subscriptions and lose $5M from media, then subscriptions account for about 103% of your profits (168/(168-5)).

[dsr_]

profits = revenue - expenses

So, the revenue from their subscriptions/AIM customers is not merely the only thing which is profitable for them, but the other lines of business are all run at a loss.

Fictional example:

Line Revenue - Expenses = Profit dialup 1000 - 100 = 900 everything else 200 - 500 = (-300) Totals: 1200 - 600 = 600

[melvinmt]

Well, any revenue usually accounts for more than 100% of profit.

[berberous]

The rest of the company has a negative profit (loss). For example, with made up numbers: $100mm profit from subscription division + $50mm net loss from advertising business = $50mm total profit, but 200% of that total profit comes from the subscriptions.

[mikegreco]

What this is saying is that subscriptions are making more money for AOL overall than the other ventures are losing, so they are making profit above and beyond other losses (as opposed to breaking them even.)

It's a shorthand way for the writer to say that subscriptions are such a cash cow, it really doesn't matter what the other divisions are doing.

[GotAnyMegadeth]

I guess if it made losses in other areas, then added together, the total profit would be less than the revenue in "services like AIM"...

[criley]

Maybe the amount of profit from those two equals say a number that is 120% of their total net profit, but losses in other divisions bring their total net profit down.

Therefore, the profits of those two divisions is greater than the profit of the company?

[arbuge]

I find it hard to believe those media properties like Huffpo are losing money. I didn't read their financial statements but I wonder if it's just a financial artifact caused by deprecation/amortization. They bought Huffpo for $315m a few years ago for example... if they're amortizing that over several years, they could really be printing money but ending up with an accounting loss.

[illuminate]

I'd like to think my friends realized that HuffPo was a vile pit of tabloid trash (independent of their pandery political positioning) and content farming. I WANT TO BELIEVE. Don't take this away from me!

[vidarh]

I don't find it hard to believe: If you had a massive revenue stream coming in from a product that you know is dying, you might be happy just to milk it and close up shop when it dries up, or you might decide to throw a large chunk of your earnings from that division into trying to grow your other businesses, at the expense of profitability, in the hope of being able to make solid profits from them when you scale back on the "growth at all cost" expenditure down the line. Whether or not they'll succeed at that is another matter.

[jcampbell1]

Goodwill does not depreciate, thus your accounting explanation doesn't make sense. Huffpo cannot be that profitable because their ad inventory is total garbage. That site is probably worth less than $1 CPM. They probably make a mere million dollar per billion page views.

[UVB-76]

I guess they just have enormous expenses — tons of people on the payroll, nice offices, etc. — and don't pull in enough advertising revenue to break even.

Losing money isn't hard.

[MatthewPhillips]

Just goes to show how hard it is to monetize on ads. Any startup that tries to monetize on ads is basically betting on becoming Google or Facebook level big.

[WayneS]

So they profit from idiots? That is a pretty good strategy, they will never run out.

[etrautmann]

This does not consider market cap. Yes, AOL's stock price has done better, but the total revenues are a tiny fraction of Apple...

[wpietri]

Yes.

Stock A rising more than stock B only means that the market has been more pleasantly surprised about A than B.

So given that the point of the article is "AOL is doing surprisingly well thanks to low expectations", it'd be natural that the stock would gain more than companies that people expect more from.

Also, I'd have a hard time calling AOL successful (which the article does). They're net profitable, but on something that's doomed. And the thing that's supposed to save them, selling ads against content, is looking pretty sickly as well. Profit is correlated with success, but they're definitely different.

[chourobin]

Also the chart only dates back 1 year... why not do a 5 year comparison? Oh right.. because Apple stock has outperformed AOL by a factor of 2 even with the recent 30% dive in market value.

[spoiledtechie]

I was just asked for an Interview by AOL for their Streaming Media business. The recruiter told me that the media business was totally profitable as I questioned AOLs future.

I guess now, in hindsight, im glad they were working with tech I didn't want to put my hands into or someday, I would be looking for another job.

[Demiurge]

AOL also own Winamp, my favorite music (and internet radio) app since the 90's :(

[rokhayakebe]

I am wondering they don't run TV ads targeted towards this demographic.

[fluidcruft]

Revenue for that division/activity happens to be larger than overall company-wide profit. The author's use of "accounts for" implies some sort of causality, but I suspect literary flourish and innumeracy.

[dgbsco]

MapQuest.