AOL stock shot higher Wednesday on its better-than-expected earnings report, thanks to advertising growth and slower subscriber churn. CEO Tim Armstrong told CNBC he sees that advertising growth continuing.
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AOL offices in Palo Alto, Calif.
Immediately after the call with investors, Armstrong talked to CNBC in an exclusive interview about what’s driving these numbers and what lies ahead.
Armstrong was optimistic and upbeat, noting that results improved from the first quarter to the second quarter. He expects them to continue to improve over the course of the year.
He’s committed to investing to expand AOL’s ad business where he sees the biggest payoff: video, premium ads, and mobile ads. And he’s generally optimistic, saying that despite economic uncertainty, he expects there to be a “tailwind across digital advertising.”
“Video, premium formats and local are growing quickly and we think those are going to be the growth engines of the future in advertising,” Armstrong said.
Things are even looking good in Europe, he said, because AOL is starting from such a small base.
AOL has been criticized for its ongoing investment in Patch, its network of hundreds of local websites. But Armstrong explained his perspective. He said AOL can get a website to serve a local town up and running for $150,000. Each of those markets has up to $20 million in media spending.
With those numbers, each of the Patch sites could have as much as $500,000 in annual revenue over time. Multiply that by the 800 to 900 markets Patch can be in, and that ends up being a significant number. Armstrong defended his persistence with Patch, saying that to scale to 10 million users and some $50 million in revenue in “essentially two years,” isn’t too shabby.
Armstrong also dropped some hints about his next big endeavor — expanding AOL beyond its reliance on ads, with a move into commerce. AOL is hoping to get into peer-to-peer commerce with Patch, and help people “do more local transactions overall,” Armstrong said.
“We’re continuing to look towards the future of how we enable not just information in towns, but also how people spend money and how we fuel the strength of local communities," he said.
On the earnings call, he said AOL is set to unveil two commerce-related announcements in coming weeks. We’ll see if this can provide AOL another leg of growth.
Check out my full interview with Armstrong in the video clip.
-By CNBC's Julia Boorstin
@JBoorstin
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