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AOL Finally Shows a Business Pulse

AOL Inc., the Web publisher that owns the Huffington Post and TechCrunch, climbed the most in three months in New York trading after posting its first sales gain in eight years.

Fourth-quarter sales rose 3.9 percent from a year earlier to $599.5 million. Analysts had estimated that revenue would drop to $566.7 million in the period. The surprise growth came largely from AOL’s third-party ad sales business, which helps other Web publishers sell ad space through automated systems — a process called programmatic buying.

“The future of advertising is going to be more machine-to-machine trading,” Chief Executive Officer Tim Armstrong said in an interview, referring to the rise in trading desks that are used to buy and sell digital ad inventory, similar to the way stock markets work. “There will also be growth in the human side of buying as well.”

The shares advanced 7.4 percent to $33.72 at the close in New York, the biggest one-day increase since November. AOL’s stock has surged 86 percent in the past 12 months, better than the 12 percent return from the Standard & Poor’s 500 Index.

The uptick in revenue marks a turning point for Armstrong, who has worked to transform the New York-based company into an advertising-based content publisher rather than a dial-up Internet service provider. AOL, which was spun off from Time Warner Inc. in 2009, said total advertising rose 13 percent to $410.6 million in the quarter.

Earnings Estimates

Net income rose to $35.7 million, or 41 cents a share, from $22.8 million, or 23 cents, a year earlier. Excluding some items, profit was 55 cents a share. That topped the 53 cents analysts predicted, according to data compiled by Bloomberg.

The company also authorized $100 million in stock repurchases over the next 12 months. It spent almost $700 million on buybacks in 2012, reducing its shares outstanding by 19 percent.

By reducing the number of shares outstanding, the repurchases ended up boosting Armstrong’s stake in AOL. In a filing today, he said he now owns 6 percent of the company, based on shares he acquired in 2010 and 2011.

Search advertising increased 17 percent in the fourth quarter to $103.6 million, according to the company. Display advertising — a category that includes banners and video — was little changed at $169.8 million.

Armstrong has spent more than $600 million on Web publishing, acquiring the Huffington Post in 2011 for $315 million and investing more than $300 million to develop Patch, a local-news division that he said should start becoming profitable by the end of this year…

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