AOL Inc reported a surprise second-quarter loss on Tuesday, citing weaker-than-expected advertising growth.
The company, which Time Warner spun off after a disastrous decade-long merger, is trying to regain its former status as one of the world's most popular online destinations by investing heavily in efforts such as hyperlocal news network Patch.
Advertising revenue rose 5 percent to $319 million. Sales of display ads -- big splashy units that appear on Web pages -- gained 14 percent, but Evercore Partners analyst Ken Sena was expecting a 25 percent increase.
While AOL has finally made progress turning its advertising revenue around after several quarters of declines, Chief Executive Officer Tim Armstrong said display growth should have been stronger.
We had the ability to capture more than we did, Armstrong said during a call with analysts.
AOL recently reorganized its sales force at the end of July as a part of an effort to boost lagging advertising demand. At that time, its head of advertising -- former Google executive Jeff Levick -- left the company.
From an investor standpoint, didn't we go through this last year? Sena said. To be honest, you have so many buying opportunities out there where the stocks have strong fundamental stories.
Still Armstrong insisted on the call that the shake-up was not another reorganization -- one of several that AOL has been through over the past couple of years -- and that the sales force remained intact.
It's about us improving the operations of our advertising business globally, he said.
AOL is up against Google as well as newer rivals like Facebook and Twitter.
The company said its second-quarter loss had narrowed to $11.8 million, or 11 cents per share, from $1.06 billion, or $9.89 per share, a year earlier, when it took a goodwill impairment charge of $1.41 billion.
Analysts on average were looking for a profit of 4 cents per share, according to Thomson Reuters I/B/E/S.
Revenue fell 8 percent to $542.2 million, beating analysts' forecasts of $530.4 million.
(Additional reporting by Saqib Iqbal Ahmed and Sayantani Ghosh in Bangalore; Editing by Saumyadeb Chakrabarty and Lisa Von Ahn)