NEW YORK (AP) -- Shares of AOL Inc. jumped nearly 10 percent Wednesday after the company announced its year-over-year advertising revenue had grown for the third straight quarter.
THE SPARK: AOL reported the results as part of its fourth-quarter earnings. The company said advertising revenue increased 10 percent to $363.8 million during the quarter. That growth helped offset a decline in revenue from the company's subscriptions, which are generated by its fading dial-up Internet service. Subscription revenue fell 18 percent to $194.6 million.
THE BIG PICTURE: Advertising revenue is critical to AOL's success as the company shifts away from a profit model based on subscription fees.
Internet companies like AOL have had a hard time figuring out how to charge money for online advertising. Selling internet ads often generates just a fraction of the revenue that traditional media get by selling print or TV ads.
THE ANALYSIS: The rising ad revenue helped AOL deliver quarterly results that beat expectations. It earned $22.8 million, or 23 cents per share, in the quarter ended Dec. 31. That was well above the 16 cents per share that analysts expected, according to FactSet.
Revenue was $576.8million, topping analysts' prediction of $573.1 million.
Still, AOL's news wasn't all positive. Profits and revenue were down from the same period last year.
Citigroup Global Markets analyst Mark Mahaney said that the quarterly results didn't show fundamental improvement to AOL's business. But the results were surprisingly better than analyst expectations, he wrote. Mahaney rates AOL stock "Neutral/High Risk"
SHARE ACTION: AOL shares rose $1.55, or 9.6 percent, to close at $17.76. The stock has traded between $10.06 and $24.22 over the last year.
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