America Online 2014 Annual Report Download - page 56

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AOL INC.
PART II—ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The primary non-financial metrics we monitor for our subscription service are monthly average churn and
average paid tenure. Monthly average churn represents on average the percentage of AOL subscribers that are
either terminated or cancel our services each month, factoring in new and reactivated subscribers. The domestic
AOL subscriber monthly average churn was 1.5% for the years ended December 31, 2014 and 2013 and 1.8% for
the year ended December 31, 2012. Average paid tenure represents the average period of time individuals have
been AOL subscribers. The average paid tenure of the remaining domestic AOL subscribers has been increasing,
and was approximately 14.0 years, 12.9 years and 11.8 years for the years ended December 31, 2014, 2013 and
2012, respectively.
Consolidated Results of Operations
Revenues
The following table presents our revenues, by revenue type, for the periods presented (in millions):
Years Ended December 31,
2014 2013
Change
from 2013
to 2014
% Change
from 2013
to 2014 2012
Change
from 2012
to 2013
% Change
from 2012
to 2013
Revenues:
Advertising and other . . . $ 1,920.7 $1,669.8 $ 250.9 15% $ 1,486.4 $ 183.4 12%
Subscription .......... 606.5 650.1 (43.6) (7)% 705.3 (55.2) (8)%
Total revenues ............. $ 2,527.2 $2,319.9 $ 207.3 9% $ 2,191.7 $ 128.2 6%
The following table presents our revenues, by revenue type, as a percentage of total revenues for the periods
presented:
Years Ended December 31,
2014 2013 2012
Revenues:
Advertising and other ................................................. 76% 72% 68%
Subscription ......................................................... 24% 28% 32%
Total revenues ........................................................... 100% 100% 100%
Advertising and Other Revenues
Advertising revenues are generated on AOL Properties through display advertising (which includes video
advertising) and search advertising, as described in “Item 1–Business–Revenues” herein. Agreements for display
advertising on AOL Properties typically take the form of impression-based contracts in which we provide
“impressions”, which are delivered when an advertisement appears in web pages viewed by users, in exchange
for a fixed fee (generally stated as cost-per-thousand impressions), time-based contracts in which we provide
promotion over a specified time period for a fixed fee or performance-based contracts in which performance is
measured in terms of either “click-throughs,” when a user clicks on a company’s advertisement, or other user
actions such as product/customer registrations, survey participation, sales leads, product purchases or other
revenue sharing relationships. Search advertising revenues are generated on AOL Properties when a consumer
clicks on a text-based ad on their screen. These text-based ads are either generated from a consumer-initiated
search query or generated based on the content of the web page the consumer is viewing. In addition, agreements
with advertisers can include other advertising-related services such as content sponsorships, exclusivities or
advertising effectiveness research.
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