Shareholders to AOL: “You’ve got #FAIL”

When your only profitable business consists of people who are too clueless to switch from dialup, well you might be AOL CEO Tim Armstrong.

AOL Inc shares tumbled 10 percent on Wednesday after it posted another loss in its content group, reviving concerns that the company’s profits were still mostly coming from a shrinking dial-up platform.

The stock’s plunge was the second-worst decline in 18 months, and follows what had been a 67 percent rise over the last year.

For the past several years, AOL has been trying to transform itself into a media destination with a stable of sites like the Huffington Post and Patch. It’s a change from the days when it was best known as an Internet access business with free-trial CDs that clogged mailboxes.

AOL Chief Executive Tim Armstrong has invested heavily in content, including plowing well over $100 million into Patch, a group of hyperlocal websites that covers neighborhood news and events.

Even with all of that spending, the legacy subscription service is still the most profitable part of the company. The membership group, which includes subscriptions, posted operating profit of $146.4 million in the quarter.

AOL’s media sites turned in an operating loss of almost $5 million. Those sites, which include Patch, Huffington Post, Engadget and TechCrunch, lost almost $17 million in the year-ago period.

“Patch is still a money losing proposition,” said Ron Josey, an analyst with JMP Securities, who estimated Patch lost $100 million last year.

If Tim could only figure out a way to put Patch onto one of those free-trial CDs!

The problem is, Patch wants to be both a hyperlocal news source and an opinion media spin-shoveler a la Puffington Host. They’re trying to replicate Arianna’s free-content model by pushing the joys of (unpaid) blogging for Patch. But their paid editors also heavily censor entries and comments which don’t toe the uber-progresssive party line.

Sadly for them, MSNBC has already sewn up the target demographic for that sort of thing.

Say, I hear Tingles Matthews is looking for a new gig; can Tim get him to work for free? Don’t bet on it. But Keith Olbermann? He’ll probably pay them!

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