Ad surge a big 'megatrend' helping AOL: CEO Armstrong

CNBC.com With Reuters
AOL earnings strong: Armstrong

A jump in advertising sales powered AOL's third quarter results past Wall Street's expectations, leading CEO Tim Armstrong to call the 6-percent revenue surge an emerging "megatrend" within the industry.

AOL was forced to absorb a host of restructuring costs and write-downs primarily related to Patch, its struggling local news arm, which pushed its profit down a whopping 90 percent from the comparable year-ago period. However, that was offset by a nearly 14-percent surge in the media company's ad revenues, which hit $386 million.

In an interview on CNBC's "Squawk Box," CEO Tim Armstrong called his company's ad performance part of a bigger theme playing out in technology and media. He said the company was positioning itself amid the "disruption of technology in media" sweeping the industry.

Tim Armstrong, chief executive officer of AOL Inc.
Scott Eelis | Bloomberg | Getty Images

"The big megatrend in advertising and marketing is the automation of advertising," Armstrong said. "Just as automation hit Wall Street, it's hitting Madison Avenue. AOL has put a big investment in this area over the last few years."

Armstrong made a big bet on Patch, spending more than $150 million on the network of local news sites dotting communities throughout the United States. However, the lackluster performance has prompted AOL to make deep retrenchments in the operation. In August, the company cut the Patch staff in half, and Armstrong was captured by an audio recording abruptly firing an employee at a tense company meeting.

Net income attributable to AOL fell to $2 million, or 2 cents per share, from $20.8 million, or 22 cents per share, a year earlier. The latest results include a $17.5 million goodwill impairment charge and $19 million in restructuring costs.

Advertising revenue rose 13.5 percent to $386 million. Total revenue was $561.3 million.

AOL's businesses include "The Huffington Post" and mapping service "MapQuest."

CNBC.com, with Reuters