AOL’s Q4: When Failure = Success

And not in the positive “I now know 999 ways not to make a light bulb” way.

AOL’s Q4—their first earnings report since spinning off from Time Warner—numbers have all kinds of red ink and negative signs in front of them: display advertising revenue down 3% total YOY, international display down 22%, search and contextual down 19%, total ad revenue down 8%, subscription revenue down 28%, Other revenue down 5%. The only gain YOY was in US display advertising: a whopping 1%. And despite total revenues being down 17%, AOL still handily beat Wall Street expectations.

Yes, failure = success when people expect almost nothing of you. Says All Things D:

After factoring out one-time charges, AOL posted earnings of 71 cents per share on revenues of $801 million. Wall Street expected earnings of either 62 cents or 66 cents per share, depending on who you ask, on revenue of around $766 million.

And that earnings per share is way higher than, say, Yahoo (22¢).

Of course, the reason the expectations are so low is that none of this is a surprise. Time Warner ditched AOL for just this reason. (Boggles the mind to think that AOL originally bought TW. Crazy, isn’t it?) AOL has long been on the decline. Although CEO (and former Googler) Tim Armstrong is striving to retool sales in both personnel and strategy, their long slog might just mire them deeper in the red ink.

Meanwhile, the CEO of Time Warner got his expected raise.

What do you think? Can AOL survive?

Microsoft’s Q4 Good, Bing’s Not So Much

Microsoft saw Windows 7 carry them to a strong fourth quarter last year—but its Online Services division (home of Bing) didn’t see a boost, according to the official reports. Microsoft emphasized Bing’s growth and the fact that their search advertising somewhat offset other losses, but the division still operated for a loss.

Microsoft reported $17.3B in revenue ($0.60/share), including a deferral of $1.7B on the Windows 7 release. They were expected to hit $17.9B ($0.59/share). For the quarter, the Online Services division saw $581M in revenue (down 5% YOY), and an operating loss of $466M (a 46% increase over last year).

Microsoft emphasized the gain in search market share and search advertising revenue. Much of the division’s losses ($29M, a 14% YOY loss) came from the Access department, Microsoft’s ISP and subscriptions to online paid services. Online advertising also saw a decline ($11M, a 2% YOY loss) but Microsoft claimed that, without the Access numbers, the Online Services division was inline with industry losses for online advertising. The losses came from display, but search’s increase wasn’t enough to counteract those losses completely.

Naturally, Microsoft closes the disappointing report with a note of (what they hope will be) good news:

On December 4, 2009, we entered into a definitive 10-year agreement with Yahoo! Inc. (“Yahoo”) whereby Microsoft will provide the exclusive algorithmic and paid search platform for Yahoo websites. We believe this agreement will allow us over time to improve the effectiveness and increase the value of our search offering through greater scale in search queries and an expanded and more competitive search and advertising marketplace. The transaction is subject to regulatory review; we expect to close the transaction in fiscal year 2010.

What do you think? Will the deal with Yahoo—where Yahoo’s display advertising and Bing’s search (and search advertising?) will run for both sites—improve both their fortunes?

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Google Gets 75% Of Paid Search Clicks & Dollars: Report

Three of every four paid search clicks happen on Google, and 75 cents of every paid search dollar is spent on Google. That’s according to the latest quarterly report from Efficient Frontier, a search advertising agency that manages more than $750 million in annual digital spending annually. The stats cover Q4 of 2009, and show [...]

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Smartphones: Taking Over the World in 2011

We talk and think a lot about mobile marketing. But frankly, only a small proportion of cell phone users have devices that are equipped for any substantial web interfacing. But that may soon change—Nielsen predicts that smartphones will make up the majority of the cell phone market in two years.

MediaPost reports that by mid-2011, half of cell phone subscribers, about 150M people, will be using smart devices. Smartphones are already showing a marked increase—Nielsen predicts that Q4 of this year will show that 40% of new phones sold are smart devices (as opposed to the Q309, slowest quarter in recent memory with smart devices accounting for only 25% of new phones).

I think that smartphone adoption will be crucial to mobile marketing finally taking off in the US. The fact that most phones today are still incapable of real web browsing has contributed to the slow start to mobile marketing. I’ve been saying for years that a better web browsing experience, like that of a smartphone, is crucial to the success of mobile marketing. And Nielsen agrees:

Nielsen also anticipates more users paying for video and premium content on their phones.

What do you think? Will smartphones reach this much of the market in another 18 months? Will 2011 be the year of the mobile?

Online Holiday Retail 2009: Are You Ready? SMN Webcast Thursday

This Thursday, June 25 at 1 PM Eastern, Search Marketing Now hosts a free webcast “Online Holiday Retail 2009: Tips, Tactics & Timelines for Success,” sponsored by Performics.
Eli Goodman of comScore will provide an overview of the current state of online retail. With Q1 e-commerce revenues flat—vs. down in Q4 2008—can we expect growth by [...]

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