AOL squeaks out a profit while subscribers continue to flee

WALLED GARDEN internet service provider AOL has posted yet another set of abysmal financial results as it tries to ween itself off rapidly disappearing dial-up subscribers and get into the advertising game.

AOL, which became famous for sending out floppy disks and CDs that were best used as drinks coasters, revealed that it managed to generate $578.8m in sales in the fourth quarter, a three per cent drop from the same period a year previously. The firm also managed to squeak out a profit of $22.8m, a mammoth decline of 66 per cent from the fourth quarter of 2010.

Although AOL's revenue suffered a fall of three per cent, the firm should be quite happy that its advertising revenue actually grew by 10 per cent. Steep downturns in subscriptions and other revenue sources dragged total revenues down to an overall decrease, though you know things are pretty bad when the firm says the drop was "its lowest rate of revenue decline in five years".

AOL has been trying to increase advertising by buying up high profile web sites such as The Huffington Post, Engadget and Techcrunch. These and its other web sites have yet to offset the steep decline in subscriptions, with full year growth in advertising sales rising by only a meagre two per cent.

Tim Armstrong, chairman and CEO of AOL said he was "very pleased" at the way AOL finished off 2011, claiming the quarter was a big step forward for the company. The reason why Armstrong was so happy with the fourth quarter was that its three per cent decrease in revenue was less than those in previous quarters, which included revenue declines of up to 17 per cent.

AOL's slide into irrelevance serves as a stark warning to internet firms that users do not want to be constrained by walled gardens. Now the fate of the company rests on its most high-profile employee, Arianna Huffington, who is pushing the content side of AOL. µ