Itâ€™s bad news for content providers because AOL makes no money from them at all. Â Instead they make all of their money from old AOL dial-up subscribers who havenâ€™t looked at their credit card statement in a very long time.
AOL beat Wall Streetâ€™s Q2 revenue and profit numbers. And, like the last few quarters, the company says that its content business â€” sites like Huffington Post and TechCrunch â€” was profitable, if youâ€™re willing to accept a fuzzy definition of profit.
But as always, the most amazing thing about AOLâ€™s business is the thing that drives AOLâ€™s business: Millions of people, who started paying the company a monthly fee for Internet access more than a decade ago, who continue to pay the company a monthly fee for Internet access, even though they likely arenâ€™t getting Internet access from AOL anymore.
AOL doesnâ€™t break out precise earnings numbers for this business, but it gives you enough hints to understand that itâ€™s enormously profitable. As it should be!
Tim Armstrongâ€™s company says its subscription business generated $143 million in â€œAdjusted OIBDAâ€ â€“ its proxy for operating income â€” last quarter. Thatâ€™s more than the $121 million in Adjusted OIBDA that the entire company generated.
Hereâ€™s how it makes that money: Getting a shrinking number of subscribers â€” 2.34 million this quarter, down from 3.62 million at the beginning of 2011 â€” to pay an increasing amount â€” the average AOL subscriber now pays $20.86 per month, up from around $18 a few years ago.Â