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AOL Reports Revenue And Profit Growth In Q2

Brand Group Adjusted OIBDA improved significantly versus the prior year period, primarily due to the growth in search and display revenue discussed above, partially offset by increased TAC as a result of our search marketing-related initiatives, which drove additional queries during the quarter. Brand Group Adjusted OIBDA reflects our investment for future growth in our editorial and engineering staff in areas of strategic focus.

Membership Group

Membership Group revenue declines reflect a 5% decline in subscription revenue driven by 15% fewer domestic AOL-brand access subscribers year-over-year. The continued moderation of subscription revenue declines was driven by a historically low churn rate of 1.4% and 12% year-over-year growth in domestic average access subscription monthly revenue per AOL-brand access subscriber (ARPU). ARPU growth reflects continued improvement in our retention efforts and the impact of a price rationalization program.

Membership Group Adjusted OIBDA declines primarily reflect the decline in subscription revenue discussed above, partially offset by a decline in segment operating costs.

AOL Networks

AOL Networks revenue increased 5% year-over-year, driven by growth in Third Party Network revenue on the increased sale of premium formats across the network where the number of publishers and advertisers continues to grow. AOL Network’s year-over-year revenue comparison was negatively impacted by the absence of revenue from the divestiture of StudioNow in Q1 2013. StudioNow contributed $3.2 million in revenue to AOL Networks in Q2 2012. To a lesser extent, AOL Networks revenue growth was impacted by a decline in revenue from the sale of Brand Group and Membership Group inventory through AOL Networks, as more of that inventory was sold on a reserved basis than in Q2 2012.

AOL Networks Adjusted OIBDA decreased year-over-year due to higher research and product development costs primarily related to continued investment in premium formats as well as Ad Learn Open Platform (our demand-side platform) and AdTech MARKETPLACE (our supply-side platform). AOL Networks-related TAC increased by 7%, slower than the rate of growth of Third Party Network revenue.

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