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AOL (NYSE:AOL)

Q1 2014 Earnings Call

May 07, 2014 8:00 am ET

Executives

Eoin Ryan -

Timothy M. Armstrong - Chairman and Chief Executive Officer

Karen E. Dykstra - Chief Financial & Administrative Officer and Executive Vice President

Analysts

Brian J. Pitz - Jefferies LLC, Research Division

Ronald V. Josey - JMP Securities LLC, Research Division

Ross Sandler - Deutsche Bank AG, Research Division

James Cakmak - Telsey Advisory Group LLC

Peter Stabler - Wells Fargo Securities, LLC, Research Division

Matthew Thornton - SunTrust Robinson Humphrey, Inc., Research Division

Laura A. Martin - Needham & Company, LLC, Research Division

Victor B. Anthony - Topeka Capital Markets Inc., Research Division

Anthony J. DiClemente - Nomura Securities Co. Ltd., Research Division

Neil A. Doshi - CRT Capital Group LLC, Research Division

Youssef H. Squali - Cantor Fitzgerald & Co., Research Division

Operator

Good day, ladies and gentlemen, and welcome to AOL's First Quarter 2014 Earnings Conference Call. My name is Laura, and I will be your coordinator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to Mr. Eoin Ryan, Senior Vice President of Investor Relations and Corporate Communications. Please proceed.

Eoin Ryan

Good morning. Thanks, Laura and everyone, for joining us on our first quarter 2014 earnings call. You can find our Q1 earnings press release and accompanying slides and trending schedules on our Investor Relations website.

On the call with me today is our Chairman and CEO, Tim Armstrong; and our Chief Financial and Administrative Officer, Karen Dykstra. We'll make some brief remarks on the quarter and our overall strategy and then we'll open up the lines for Q&A.

But first, I'll remind you that during this call, we may discuss our outlook for future financial and operating performance, corporate strategy, marketing and product plans, technology improvements, cost initiatives, planned investments, as well as our expectations for the economy and online advertising in general.

These forward-looking statements typically are preceded by words such as we will, we expect, we believe, we anticipate, or similar statements. These forward-looking statements are subject to risks and uncertainties, and our actual results could differ materially from the views expressed today. Reported results should not be indicative of future performance. Some of the risks have been set forth in our Annual Report, Form 10-K, for the year ended December 31, 2013, filed with the SEC.

All information discussed in this conference call is as of today, May 7, and we do not intend and do not undertake any duty to update this information to reflect future events or circumstances.

We will also discuss certain non-GAAP financial measures, including adjusted OIBDA and free cash flow. I'll refer you to press release in the Investor Relations section of our website for all comparable GAAP measures and full reconciliations.

Finally, from time to time, we post information about AOL on our Investor Relations website at ir.aol.com and our official corporate blog at blog.aol.com.

And with that, I'll turn it over to Tim.

Timothy M. Armstrong

Thanks, Eoin. Thanks, everyone, for joining the call. We are very happy to report another quarter of growth at AOL. Growing consumer traffic, growing revenue and growing OIBDA is a triple play that has been, and will remain, our focus. We will cover an overview of Q1 on the call as well as a deeper look at the next phase of AOL.

Overall, I am pleased with Q1. After a very strong Q4, Q1 continued with strong growth in our platforms area, programmatic ads, video and the expansion of our global content brands. AOL is leading in some of the most important spaces for the future of the web and mobile, and we continue to attract world-class talent to the company, and AOL's offices and teams are almost fully transformed into a company of the future.

As Q1 started, we faced a slow January that was driven by headwinds, partially by search. Our team at AOL quickly and directly addressed the headwinds, were able to parallel-process our growth opportunities while implanting cost mitigation efforts. We left Q1 in a strong position to deliver on our Q4 -- on our 2014 plans overall and essentially, our 2015 long-term strategy.

Our execution during Q1 strengthened the company, and Q1 had a number of exciting milestones. At AOL Core, AOL.com updated both the consumer-facing experience, including the launch of universal navigation across AOL brands in a new, unified identity, resulting in the growth of daily visitors to AOL.com in March. AOL Mail for mobile and tablet continued to improve the consumer experience, resulting in strong growth of those products during Q1. Modernization of AOL's Core brand was driven by improvements in ad products for the homepage and a new series of ad products for Mail. In April, AOL.com launched the new AOL.com video experience in mid-April, a 24/7 program video module tied directly to consumers' top content interests throughout the day.

Along with the AOL brand, our portfolio of global brands also produced meaningful results. AOL brands are #1 in 6 comScore categories. We won 3 Webby Awards for Autos, HuffPost Live and HuffPost Parents. AOL Lifestyle reached a massive milestone during Q1, reaching the #1 position in the lifestyle category. We now have hundreds of contributors in the lifestyle network.

We continued to also expand our power brands globally. The Huffington Post announced expansions into Brazil and South Korea. Engadget expanded into the U.K. And after expanding our MAKERS brand to the event space in Q1, we recently announced the global expansion of MAKERS brand into China in partnership with Sun Media at the Her Village, a site attracting over 300 million viewers per month.

We are continuing to roll out new brand products as we sit in Q2. TechCrunch unveiled a new CrunchBase, and we are currently hosting a sold-out TechCrunch Disrupt in New York City. MovieFone relaunched in a partnership with Whalerock, formerly BermanBraun, just this Monday and is now a one-stop shop for all things movies and TV.

We continue to make AOL brands more personal and relevant, and the personalization of our global brands was a highlight during the quarter. We deployed Gravity across a number of AOL brands in our portfolio, allowing us to get the right content to the right user at the right time. We also created an exclusive partnership with Major League Baseball and MapQuest to personalize MapQuest for your favorite MLB team. MyApp is set to the World Series champion, the Red Sox.

In Platforms, we continue to be a global leader in the transformation of programmatic advertising, mobile advertising and video platforms. Our combined programmatic advertising products, AOP, MARKETPLACE and Adap.tv, grew at over 100% year-over-year.

Mobile advertising also grew at triple digits year-over-year. More than 50% of our clients ran cross-screen campaigns on our platform during Q1. Advertisers are increasingly coming to AOL to simplify their planning, buying, analyzing and optimizing of their advertising campaigns.

Based on our strategy and demand we see in the marketplace, we also announced at the end of Q1 our programmatic ads platform, ONE by AOL, and we announced it at ad:tech San Francisco in partnership with IPG's Mediabrands. IPG Mediabrands has set a public goal of moving 50% of its approximately $40 billion in global spending to automated processes by 2016, and AOL was the first preferred partner in the programmatic industry to announce the partnership with IPG.

As part of the move to ONE by AOL, we recently launched an enterprise advertising organization to begin selling our ADTECH products more deeply on an enterprise level and to advertisers and agencies. One big addition to ONE by AOL and our advertising strategy overall is the acquisition of Convertro, which I'll talk about in a few minutes.

Video was another big highlight for us during Q1. AOL is now consistently a top 3 player in videos, video views and video ads served per month. On the video distribution side, we continue to gain momentum, most recently signing deals with Microsoft and Miramax. We now have a high-quality video syndication network running through high-quality pipes and high-quality publishers like ESPN, Conde Nast, Time Inc. and The New York Times.

In April, we held our third annual video NewFront, launching a slate of 16 original video series, including 4 renewed shows from last year and our first foray into long-form content with a show called Connected. The event brought more than 2,000 people to Brooklyn. We sold more advertising ads or videos slate this year before the show started than we did the entire year last year, and we sold the entire slate in Canada.

We also announced groundbreaking partnership between Nielsen and AOL, which will allow advertisers to directly compare TV and web video audiences. AOL's video audience will be measured in GRPs, and AOL's video will be tagged using Nielsen's OCR system. Over the coming years, this partnership has the potential to game-change the TV web advertising ecosystem.

We continue to upgrade our talent base also at AOL. Bill Pence joined us from WebMD to serve as our new Global CTO; Kim Kadlec, one of the best marketers in the world, came to run our global distribution and business development efforts; and Dave McDonald came from Yahoo! where he was running Mail to pick up the Mail product and communications products overall at AOL.

On the last call, I mentioned that we are planning to move from a company that grows to a growth company. As we move toward that goal, there are some basic areas I want to cover so we all have the same set of expectations and flight plan.

Moving to a growth company for AOL means the following. Number one, in our strategy, our strategy will stay consistent. We are building the best media and technology company for the digital age. We are mechanizing media and advertising, and our strategy is narrowing, based on where we see significant market opportunities for consumer growth, partner growth and customer growth.

As the market changes, we are recalibrating our course to stay on our long-term strategic goals. Our strategy is to be a leader in the following areas of media and technology, and those areas are aimed at meaningful needs in the media and technology industry.

The first area is video. We started off at #27 in video in 2010, and today, we are an industry leader. But we are just scratching the surface on all fronts in this business. We are building an end-to-end business that covers creation, duration, distribution and modernization, and we have a very strong and talented team of people in our video business.

The second area is programmatic advertising. We started this business from scratch a couple of years ago, and we are now a leader in this area. We are seeking to make advertising as easy as ecommerce, and our goal is to have an end-to-end system that is more effective use of time and money than a series of point solutions.

We are announcing another big foundational block in the AOL programmatic ad stack, Convertro, the acquisition we announced yesterday, the -- it's a multichannel measurement company, and it's a key to AOL's success. I wanted to welcome the Convertro team to AOL. This is a very exciting development for our customers as AOL will be the leader in attribution modeling tied to programmatic advertising. The one-sentence summary on Convertro is that the ad industry is moving from measuring the last click, the equivalent of measuring the last billboard you saw while driving to a store to measuring total exposures to conversions and what we have branded internally as E2C, exposures to conversions, ad which is the true life cycle of how the consumer interacts with advertising. If we live in the era of TV Everywhere, at AOL we believe in measurement everywhere.

Third area is the AOL Core brand experience. We have a global brand in AOL, a global consumer base and a business that can be updated to improve the future of the Internet across all screens. AOL's Core business is a valuable one, but it had not been unified in years in a way that will allow it to thrive in the future. We have unified that business, and the experience includes subscriptions, homepages, search, mobile and a number of our other products that we are diligently improving.

The fourth area is our global content platforms. We have made a series of investments in content, which are well known. We have expanded our strongest brands globally, and we have narrowed our investments and time on these brands to platform advantages. If you look at things like TechCrunch's CrunchBase or the Huffington Post, HuffPost Live, these are the types of platforms that we want to invest in the future, that are global in nature and highly scalable.

A large percent of the consumer usage and growing percentage of the advertising is coming through mobile, and our brands matter in the smaller environments. We've had tremendous mobile growth as a business in the global content space, and we expect that to continue.

The second part of becoming a growth company and second major area is really having clear objectives and clear execution. We executed against the objectives we set for the company in 2010, which was to get the company back to being a growing company by 2013. We achieved that objective ahead of schedule. The next execution milestone at AOL is to be a growth company in a growth industry. We have set a multiyear objective set, and we will be communicating that to our team at AOL during Q2, and those objectives will be as clear as the ones we gave you in 2010.

The third thing is our most important area. It comes from our people and our culture. We are building a company to be a great place for entrepreneurs, creative talent and technologists. We are aggressively looking for the best people in the world to join us, and we are constructing an environment where people can have an impact and can do their best work. We'll be investing in our talent and in our culture, and all of that will benefit our consumers and customers.

The strategy summary is that we are consistently building the best media and technology company we can, and we have precise areas we see as opportunities, and we are pursuing those opportunities methodically and deliberately.

We are also building a company that is a great partnership company, and that is a strategic advantage. We want to work with everyone we can help and everyone who can help us. Today, AOL is a more focused company than we were 4 years ago. We have excellent talent, and we have made true progress. Our teams have done a great job, and I expect them to tackle the toughest opportunities and challenges in pursuit of building a great company.

With that, I'll turn the call over to Karen

Karen E. Dykstra

Thanks, Tim, and good morning, everyone. I'll run through the highlights of our Q1 results, and then we'll get to Q&A.

First, AOL grew revenue and adjusted OIBDA for the fifth consecutive quarter, another quarter of growth, showing consistency despite the slow start to the quarter that Tim mentioned.

Second, our investments are paying off, and AOL is positioned well in areas with secular and strong growth. The Brand Group is growing its audience and international footprint, the Platforms group is rapidly growing its programmatic and video offerings and the Membership Group remains stable.

And third, Q1 represents a solid start to the year, and you should expect to see consistent improvement over the course of 2014.

Moving on to the results. On a consolidated basis, total revenue grew 8% year-over-year, driven by 16% growth in global advertising revenue. Growth comparisons were negatively impacted by $10 million from properties that were shut down or deemphasized since the prior-year period, including Patch, which we contributed to a JV in Q1. Excluding these impacts, total revenue grew 10% on 19% growth in global advertising revenue, driven by 55% growth in third-party platform revenue and 4% growth in global display revenue.

Now I'll turn to the segments, starting with the Brand Group. The $10 million which I just mentioned impacted this segment, resulting in a 6% decline in revenue. Excluding this impact, segment revenues were flat year-over-year with Brand Group, display and search revenue both flat.

In display, we continued to place more premium formats, including video, across the breadth of our properties with the effect being improved performance for advertisers and double-digit growth in pricing for AOL.

However, growth in pricing was offset by a decline in the number of impressions sold in Q1. We are now getting better yields across our properties, and our focus is on leveraging that with increased audience. That process is already under way. And to call out a few things, we've revitalized AOL.com with a deeper level of programming and by increasing video content, including a new video module, which we know our users love. We relaunched our tech properties, TechCrunch and Engadget, in recent months; we relaunched MovieFone just this week; and we're implementing Gravity, our personalization technology, across our properties, as Tim mentioned.

Q1 is a seasonally soft quarter for the business. And as we transition to focus on fewer, more impactful brands, the resulting negative impact of the revenue affects comparisons in Q1 to a greater degree than it does in larger quarters. Looking to the remainder of 2014, we expect Q1 to be the low point for Brand Group revenue on an absolute basis and on a year-over-year gross basis.

Adjusted OIBDA for the Brand segment was $2 million in Q1, a significant improvement in the context of the Q1 losses in each of the past 3 years. We have a track record of improvement, and we expect to continue that throughout the year.

At AOL Platforms, revenue growth remained at 43%, with 55% growth in third-party platform revenue. While Adap.tv contributed significantly during the quarter, growth was very strong excluding Adap.tv, up 19%. Last year at this time, our Platforms group was focused on growing its new programmatic display offering, AOP and MARKETPLACE, solving for programmatic video, increasing our cross-screen solutions and increasing the number of data-driven premium solutions. A year later, revenues related to these product priorities grew by double digits in Q1. Programmatic revenue grew more than 100% year-over-year and Premium Format network grew revenue at a double-digit pace, with over 40% of revenue coming from new advertisers and over 50% of campaigns were cross-screen campaigns. This is clear evidence of our progress towards simplifying digital advertising at scale and developing the most sophisticated open platforms for brand and content owners.

We believe AOL Platforms has a significant opportunity to continue capturing share of the rapidly growing programmatic advertising market. The Platform segment's adjusted OIBDA in Q1 continues to reflect investment to achieve that goal. That said, we expect that segment to surpass $1 billion in revenue this year and to produce positive adjusted OIBDA in 2014, with margins turning positive in the back half of the year even as we continue to invest and scale.

Specifically, we are investing in enhancing our individual programmatic display and video products while, at the same time, building out ONE by AOL to enable advertisers to plan, run, optimize and analyze across all formats and screens on one platform. We see significant opportunity here to continue to grow revenue rapidly. We've invested ahead of the curve, and we will continue to fuel this business and add to our tech staff to lead in this area, evidenced by our acquisition of Convertro.

In the Membership Group, revenue declined 7% year-over-year with growth in segment display revenue offset by continued declines in subs revenue. Membership display revenue grew during the quarter driven by a strong quarter for AOL Mail. Meanwhile, subscription revenue declined 10%, and churn dropped from 1.9% in Q1 last year to 1.5% in Q1 this year. While churn grew sequentially, I will note that the uptick from Q4 is characteristic of the seasonality we have seen in the past years.

Membership segment adjusted OIBDA declined 6% year-over-year, and margins remained strong at 70%. Our Membership team is actively pursuing avenues that can return this segment to growth, and we believe some disciplined investment is warranted given our progress to date and the obvious upside of a more stable Membership revenue stream for AOL. That said, our Membership business is metric driven, and we can quickly determine the success or failure of certain initiatives if we're not seeing enough progress and evidence of success.

We have pulled back on Gathr as we continue to refine our bundled subscription model offering. Specifically, we are revisiting the number of choices in the bundle and how different bundle offerings are packaged. We are working on new subscription services based on the learnings and underlying back-end systems we've developed, and we still believe there is opportunity here.

Turning to overall profitability, adjusted OIBDA grew 2% year-over-year in Q1 driven by revenue growth and lower G&A, which declined $8 million on lower marketing-related and personnel costs.

Just a quick note on the cost of revenues, which grew by $64 million year-over-year. $53 million of that increase was related to increased TAC, or traffic acquisition costs, which primarily reflect 3 things: First, the inclusion of Adap.tv which we acquired in September 2013; second, growth in third-party platform revenue, excluding Adap.tv; and third, growth in our search marketing-related efforts.

Increase in TAC from third-party platforms, including Adap.tv, relates directly to the third-party platform revenue growth and is consistent with Q1 last year at 64%. TAC related to search marketing efforts is directly related to Brand Group search revenue.

Further down the P&L, operating income, net income and diluted EPS were negatively impacted by a pretax restructuring charge of $12 million primarily related to a reduction in headcount in certain areas of the company. To be clear, we are investing and hiring in our highest growth opportunities.

Operating income, net income and diluted EPS were further impacted by a $10 million asset impairment charge resulting from the write-off of capitalized software development costs at our Membership segment. This charge was recorded in cost of revenues.

Some details now about the acquisition we announced yesterday. We acquired Convertro, a leading provider of multi-touch attribution modeling technology for brands and agencies, for $101 million. The purchase price is comprised of $80 million in cash up front, plus there is about 2 million in converted stock options -- stock awards and $10 million to be earned through the end of 2015. The revenue expectations for Convertro are based on continuing their attribution software service model, as well as lift we expect in our AOP and Adap.tv businesses and, most importantly, the integration into our programmatic platform, ONE by AOL.

We expect the acquisition to reduce OIBDA by approximately $10 million in 2014. Additionally, we expect $7 million of intangible amortization and $1 million of stock comp expense as a result of this acquisition in 2014.

As we look at the remainder of 2014, even as we absorb the additional $10 million OIBDA impact I just noted, I remain comfortable with my previous guidance for the year of at least $500 million OIBDA in 2014.

Turning to the balance sheet, we ended Q1 with $124 million in cash and equivalents. During the quarter, we borrowed $30 million under the credit facility agreement, and we drew an additional $75 million in relation to the Convertro acquisition and for general corporate purposes. We have $145 million remaining available on our revolving credit facility.

Our free cash flows for Q1 was negative, as it typically is for Q1, primarily due to the timing of annual bonus payments. Free cash flow was also down compared to the first quarter last year due to the early receipt of a significant payment from a large partner in Q1 last year. This payment was received in Q2 this year. And therefore, will have a stronger Q2 free cash flow comparison. Q1 will, as usual, be the low point for the year in free cash.

To conclude, 2014 is off to a very solid start, and we look forward to continued improvement throughout the year, while our investments in our people, products and technology position us strongly for growth this year and beyond.

And with that, I'll open it up for questions and turn it to the operator.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Brian Pitz from Jefferies.

Brian J. Pitz - Jefferies LLC, Research Division

Tim, you've talked about the barbell approach before. Where do you think you are in terms of spending on marketing services versus programmatic? And looking further out, what do you think are sustainable long-term margins for both the Brand and the Network businesses once these businesses have reached scale?

Timothy M. Armstrong

Sure. So Brian, basically, that's -- in a very short summary of our -- the barbell strategy is we believe that we are in a marketplace for a very long period of time going forward where there's going to be the mechanization of Madison Avenue, meaning that a lot of things that are getting traded by humans today will be enhanced by the trading of machines. So I think you can expect us to continue both organic and inorganic investments in that marketplace because it's a very, very substantial marketplace. The best way to think about it is, even in a couple of years, only 10% or so of that marketplace will be mechanized at the scale it will be over the course of time, and I think you're looking at tens of billions to hundreds of billions of dollars over the next decade there. So our strategy there is to be a leader in that platform business. That's what the Convertro acquisition's about. That's what Adap.tv was about. It's about the organic things we built in AOP and MARKETPLACE. So that side of the barbell will continue to get investments. On the marketing services side, which is essentially the brand side of the barbell, I mentioned in my remarks that we are getting more precisely focused on certain strategies. And I think one of the things that we have really kind of zeroed in on over the last year has obviously been video. And video is a multitiered strategy where we can take our current content brands, enable them with a video. That video also works on mobile. So our strategy in the marketing services side is to take our strongest brands and to expand them at a global basis on top of platforms like video and mobile and those things. And then the second piece of it is we're also getting to be a very, very good company at the partnership side of marketing services. So if you look at the ESPN deal in particular, some of the bigger content deals we've done, we've been able to use our marketing services area to give distribution and monetization to other companies as well. So I think what you're seeing on both sides of the barbell for us in the future is big investments in the mechanization of Madison Avenue, which we're going to continue doing. We're a leader in. And the second piece is the platformization. We're building platforms underneath our marketing services area on the content side and bringing in a lot more partners, as well as investing in our core brands. But I don't think you'll see us do a lot of investing that either aren't about mechanization or aren't about platforms on a go-forward basis. I think we've shown that we can really grow in the most important areas, both with mechanization and the platform approach on the marketing services side, and that's really what our strategy is more precisely being focused on. I think there was a second part to the question about...

Karen E. Dykstra

I'm sorry, but I think there was a second part of the question, which was about margins in the Brand segment.

Timothy M. Armstrong

The -- what you expect the margins to be.

Karen E. Dykstra

The -- we've been investing in the Brand segment for some time. At the same time, we've been paring back and focusing in the Brand segment. So I think I talked a little bit in the script about the effect of the paring back in some of our smaller properties or the ones that didn't have as much potential. We've, on the other hand, been investing in some of our Brand properties, such as Huffington Post, with international expansion as well as video. So I think that the Brand segment margins can get into the high teens and low-20% over time. In the platform business, obviously we're in heavy investment mode at this point in our cycle. We've invested heavily in building our own products. We've built our own AOP and MARKETPLACE. You've seen us allocate capital there with acquisitions recently, the last 3: with Adap.tv, with Gravity and now with Convertro. So we're allocating capital there. And we're still building out the tech stack. So we've been investing heavily and continue to do so. We see extremely rapid revenue growth there. And we'll continue to see margin improvement. I think you'll see, I believe, the business can get to the -- in the near future, the high-single digit business. Remember there's an element of TAC that we deal with in that business, in not all parts of it, but the majority of that business. So I see the margins improving over time, but I can see in the short term high-single digits.

Operator

Your next question comes from the line of Ron Josey from JMP Securities.

Ronald V. Josey - JMP Securities LLC, Research Division

So one for Tim and one for Karen. So Tim, first of all, on the NewFront, we were there; very well attended. I had a question on Nielsen ratings. Last year, you announced the Mediaocean partnership; this year, Nielsen. And so I just want to know, in your conversation with marketers, particularly the TV/video marketers, the addition of Nielsen ratings, how has that affected them? Do they fully understand that they can now compare AOL with traditional TV in terms of GRPs? And then, Karen, on the -- just a quick question on cash given the acquisition today. I think AOL ended the quarter with $123 million. Looks like you're funding a lot of the acquisition for now on the revolver. What level of cash do you feel comfortable with going forward?

Timothy M. Armstrong

So Ron, there's 2 major components to your question in terms of the TV marketing business, and it's not dissimilar to the way that Internet started overall. The first piece is what we announced last year, which is essentially the piping under the surface of how you traffic and process advertising, which is very important. You guys probably don't deal with this, but we do, which is when you look at an advertiser, it's important that the process flows and auditing ability for them to look at how ads are getting transacted between online and offline have a similar process. And one of the things that we talk about internally is the most important department sometimes inside of our customers is actually the finance department because they need to be able to process the overall piping of ads across different forms of media. And the Mediaocean deal was an important deal because it allowed us to essentially plug into the infrastructure and the piping side of the agencies and clients. So that was step 1 last year. Step 2 is once you have the piping put together and once you have the ability to flow ads through the system, then you have demand for ads. And by the way, if you were at the NewFront, I would argue just the pure human statement of how many people showed up on a rainy, cold night to go to Brooklyn, which was a sold-out event for us, shows you how powerful this marketplace is going to be. And I think our event was exceptional, both in terms of what we were able to sell in advertising and also the level of customers that came to it. But the second most important piece after the piping is the measurement. And if you just get on a subway or travel on an airplane or walk down the street, you see the fact that TV and video is truly everywhere, and advertisers need a way to measure kind of the GRPs they see on TV with the GRPs on the Internet. And the second important piece we announced with Nielsen was the ability for marketers to seamlessly measure, have measurement everywhere. And I think that those are very big foundational blocks for the future. And then the last thing I would just say is I have not been to a customer, and I've been out to see our major customers, both on the agency and client side, I have not met one customer that is not thinking about moving significant amounts of spending from linear TV into digital-enabled TV or digital-enabled video. So I think we're at the start of a fairly long-term and significant cycle which will regulate video and TV spending down to the way that consumers are spending. There's a giant cap. Consumers are way ahead of the marketers right now in terms of video. So the 2 things we announced last year, last year's announcement and this year's announcement, are major building blocks for us to be able to serve customers in a more efficient, effective way that goes from their finance department all the way through the efficacy of their advertising. And I would point out the Convertro acquisition allows us to do that at a much deeper level with multi-touch attribution across different channels.

Karen E. Dykstra

And then to answer the question on the cash position, we have, as I noted, $145 million left on our revolver, with another $250 million accordion feature. We have very strong free cash flow generation. So despite the first quarter being down, as I noted, it is typically our low point, and we're comfortable with our free cash flow for the remainder of the year. So I think that covers it. Within our cash balance, there's some international, but I think we are in a solid position. Obviously, we'll continue to review alternatives based on our investment opportunities going forward. But strong free cash flow, plenty of room on our current facility.

Operator

Your next question comes from the line of Ross Sandler from Deutsche Bank.

Ross Sandler - Deutsche Bank AG, Research Division

Great. So Tim, just a question on something you just mentioned. So you've been talking about improving the piping or plumbing at AOL for both ads and content. Can you just give us a snapshot, I guess, of where we are in that initiative? And when you talk about ONE platform, when is that going to be, I guess, commercially live and up and running? And is this initiative about kind of consolidating all the different pieces of the current stack? Or is it about adding new features that could grow AOL's share of wallet?

Timothy M. Armstrong

Sure. So Ross, at the highest level, at an industry construct level, advertisers and publishers are both faced with a huge amount of point solutions to be able to maximize the yields, both in terms of the ROI for advertisers and the revenue yield for publishers. And our overarching strategy is to build a connected pipe between advertisers and publishers and to make the transacting of advertising as easy as ecommerce, both on the advertisers' side and on the publishers' side. So I would say, our NewFront program and the stuff we've done in video around content and all the things we're doing on our global Brand Group is incredibly sexy to the world and something that people are really interested in. I think what gets us really excited and we think is sexy is the absolute building of the foundational platforms that this industry is going to ride on for the next couple of decades at least. And that connection point of the investments we're putting in, the easiest way to probably think about our process is building a pipeline between the 2 edges of the marketplace, between advertisers and publishers, and us filling in the feature set that are point solutions into one unified system. And the most important part of our strategy, which is important, Ross, is that we're taking an open platform approach. So just as you can plug in apps, you can go to the iTunes Store and download apps, or the Android store and download apps, we've essentially built the same app-based feature set inside of our platforms. So you're seeing us construct this end-to-end pipeline. Inside the pipeline, we're able to put features in that refine the advertising and refine the publisher inventory to a larger extent and make every impression more valuable for both sides. And I would say the one platform which we announced with Matt Seiler from IPG Mediabrands at stage at ad:tech is what we'll be rolling out later this year. But one of the things that I just want to make sure you know is that the connected platforms, we were one of the first companies to actually connect the platforms between mobile and desktop, mobile desktop and over-the-top in general. So although the ONE product is something that we'll launch later this year, our customers are able to use a set of infrastructure and plumbing right now from us today. And I -- we've said that the -- I said over 50%, but it's 52% of our customers right now are running cross-platform campaigns in that pipeline, and I'd expect us to be more and more precise about what's in that pipeline and what feature sets. Again, Convertro is a giant end to that pipe, putting on another thing on that pipe that will help customers a lot. So our open platform approach to end-to-end piping, the ability for us to very specifically understand the feature sets that need to go in that pipe are really what we're building the company on. ONE is what will come out later this year, but we're already actively pushing people to that pipeline today.

Operator

Your next question comes from the line of James Cakmak from Telsey Group.

James Cakmak - Telsey Advisory Group LLC

So Tim, you talked about the investments that are going on into the 2 sides of the barbell. I kind of wanted to drill down from the other side of the perspective, from advertisers. And with more and more interest seemingly going to the direction of programmatic, can you talk about how advertisers are viewing the barbell? Are they, in fact, wanting that two-pronged strategy or is it more on the programmatic side? And then, real quickly on the pipeline -- on the piping you're putting all these assets into play with Convertro. How do you view any other potential opportunities or do you feel that everything is in place right now?

Timothy M. Armstrong

Sure. So I would just say, first and foremost, that basically, our most successful advertisers, both in terms of sheer numbers spending and outcomes, so this is just -- this is not our strategy, this is purely what they do and what's successful, are something we call triple play. And the triple play for us is programmatic, it's video and it's mobile. And with mobile and video, a lot of those also are interested in branded content across those. But look, our barbell strategy, if you boil it down, is customers have 2 specific needs: one is to make their marketing process mechanized in general and every major agency and client is doing that today. The second piece is for them to improve their brand overall. And if you look at the spending growth that we have in advertising, it's driven by this triple-play mentality, which is, give me programmatic and then give me mobile and video on super high-value content brands overall. So the marketplace, if you look at any major advertiser at this point, they typically have a process running on the programmatic side and they have a process running on the brand side as well. I mean, one great example is if you go to TechCrunch Disrupt in New York this week, we have giant sponsors there who are online and offline doing barbell sponsorship and video sponsorships with us. You also have programmatic ads running on TechCrunch as well and across the Internet around our tech network. So we believe it's the right strategy. We believe customers want that and that's what they're doing. The investments we just talked about in piping, this is the Kaizen principle and you're never going to be done with it. It's basically the infinite loop of making products and services around the piping better and better and better. And we have a very specific scheme that we use for the planning, buying, serving, analyzing and metric-ing of advertising. And what we're doing when you see things like Convertro is filling out that flywheel over and over and over again and we know that there's a long-term, 5-, 10-year-plus cycle for us to keep improving that flywheel as an infinite loop over and over again. And that really, the better job we do at it, creates a network effect that gets more advertisers, more publishers. So I think we will continue to invest in that infinite loop and with the Kaizen principle of always improving it. So I would expect as an investor and as a partner of ours, I think our customers have that expectation that we're going to continue to make that system better and better over time and we're going to keep investing in it.

Operator

Your next question comes from the line of Peter Stabler from Wells Fargo Securities.

Peter Stabler - Wells Fargo Securities, LLC, Research Division

So just a couple of quick ones on Convertro. Tim, could you help us understand a little bit what you think are the best types of client prospects for Convertro, in terms of sectors, brand versus direct response, et cetera? And then, secondly on Convertro, we noticed this company is involved with attribution across the media mix. So we're talking radio, direct mail, television, print, et cetera. Would you expect this strategy to evolve as well with the incorporation of Convertro into platforms? Or would you expect it to continue its course?

Timothy M. Armstrong

Sure. So basically, just very, very, very simplistically right now, and this is oversimplifying it, but it would be helpful, I think, as a context, you have almost the entire industry based on attributing advertising value to the last click right now. So the last ad that was seen is getting an outsized relationship to what the value attributed to that advertising format is and who did it. That's not the correct way to do advertising attribution. So at the simplest level, if you're a consumer and you've been exposed to 20 ads for a partner, it seeks to -- Convertro seeks to put the correct attribution across all 20 ads, not just the last click. So that's oversimplified, but that's super important. Second piece with Convertro, which is really important, is the reason that we acquired Convertro, and we looked around at other companies, is they have about 3x the amount of engineers that some of the other products and services do. And number 2 is they were the furthest along in terms of thinking about attribution for linear TV. So from our standpoint of view, look at our strategy and what I just talked about in terms of the triple-play advertiser overall and you think about the planning, buying, serving and analyzing of advertising, Convertro, for us, basically takes the last click model and does something very unique, which goes back all the way through to the beginning of the advertising cycle about what you plan and gives advertisers a read, an analytics read over the entire process to tell them where their most effective advertising spend was and what converted for them, which is a much better process than the last click piece. And it also fits directly into the Adap.tv piece and I'll take you back to our Q2 earnings call, I think where we talked a lot about in the Q3 earnings so we talked about the Adap.tv purchase. And on the Adap.tv purchase, one of the things that we really liked about Adap.tv was they actually did real-time planning. So the ability to figure out real-time as you change your planning parameters, how it's going to affect the outcome of your advertising, Convertro sits at the far end of that process and does the attribution. So if Adap.tv helps you do real-time planning, which the industry uses retroactive planning right now, but it will go to real-time and Convertro sits on the end of attribution, we're building an elegant solution which will put a much higher level of transparency across the board. And then the second piece is, the attribution migration, I would call it, from last click attribution to exposure to conversion, which is a big change for the industry. I believe that is something that is not a short-term pathway; it's a long-term pathway. And AOL, I think, is at the forefront of that. So I would expect more investment to go into that space, both at our level, the clients and the agencies. And the other thing I'd say, what was en vogue a year ago were DMPs and the focus on DMPs. But I think DMPs are another feature set. What you really want is the end-to-end conversion mapping from planning to analyzing and that's what we're investing in.

Operator

Your next question comes from the line of Robert Peck from SunTrust Robinson Humphrey.

Matthew Thornton - SunTrust Robinson Humphrey, Inc., Research Division

It's actually Matt in for Bob. Membership margin hung in a little better than expected this quarter at around 70% and you talked about pulling back or rethinking Gathr. As we go forward here, should we be -- still be thinking about that mid-60%-type margin or does that pullback on Gathr suggest that we're back up to that 70% level look on go forward? And then, similarly on display, you guys have previously talked about getting display back to year-over-year growth by the second half of the year. I just wanted to see if that was still in play?

Karen E. Dykstra

Yes. So first, the question about membership margins in Gathr. I think we'll stay in the high-60s range. This quarter was strong at 70%. I don't think I would interpret the pulling back of Gathr as having a material impact on our long-term margins in the subs business. We are still looking at different subscription services and bundles, and we'll continue to invest some there. So think about the margins holding in membership, not always at 70%, but in the high 60s to 70%. I think that on the brands, the rest of the year, we'll have a more positive display story, revenue growth story for brands. We talked about the $10 million impacting the first quarter. And we also have the -- as part of that, obviously, Patch was a significant component of that, which we contributed to a JV last year. But I think that the brands, this was the low quarter for brands and we fully expect to see continued improvement in brands revenue growth and margins throughout the year.

Operator

Your next question comes from the line of Laura Martin from Needham.

Laura A. Martin - Needham & Company, LLC, Research Division

Your NewFronts were really well attended. I was wondering, Tim, last year after our NewFronts, you kind of walked us through what the sellout ratio was. I saw on your prepared remarks, you said Canada sold out, I was wondering what the status was? And also, what the budget was this year versus last year in terms of growth and overall commitment to your premium video? What's your budget trending like? And then, I was really interested in your comment that you've made a couple of times, that 52% of your advertisers are doing double- or triple-play bundles. And you had a nice answer on the most successful advertisers doing triple plays. But I'm interested, when you're looking at double plays, just a multiple, is it mostly mobile with video? Is it mostly -- like what are the components that are selling best together? I'm very interested in that.

Timothy M. Armstrong

Sure. So just a refresher is 3 years ago, we made our first NewFront and basically none of the shows were sold. We did a slate, the market was really -- we didn't have the integration of Mediaocean, didn't have the integration happening with Nielsen on the measurement side. 2 years ago, we sold a couple of slates live on stage actually. As a matter of fact, during the show, we actually had people buy the shows and we announced at the end of the show that we had sold shows during the show. This year is, we've sold more slates before the show than we sold all of last year, which I said in my remarks. So basically, you're having customers commit millions and millions and millions and millions of dollars upfront to these shows. The shows get produced and they'll roll out over time. But the way to think about this the best is people 3 years ago started with the -- kind of the intent of sniffing around to see what was possible with web video. Last year, some people put their toe in the water. And this year, people showed up with their swimsuits and towels and were ready to go by the time the NewFront started. And we're in a position now where basically from the standpoint of how you think about video and TV, I believe the Nielsen announcement we made will bring the wall down between web video and TV. And my guess is we have -- the gun has gone off in the long-term marathon between web video and TV. And it's not going to go backwards. And one of the things that I talked about at the NewFronts quickly was at the end of the NewFronts, when we made the Nielsen announcement was that we were in Brooklyn and the Brooklyn bridge was built and a couple of weeks after the Brooklyn bridge was built in 1880, 20,000 people decided to try to cross the bridge and they got really nervous because they didn't trust the measurement of the weight bearing of the bridge and they all ran backwards. There was a stampede backwards. And then P.T. Barnum marched 20 elephants across the bridge and proved the fact that the weight -- the bridge could handle the weight. And I ended our show by talking about that story because, really, what we've done with Nielsen is put the bridge across from traditional to web video. And really, the Nielsen, Steve Hasker from Nielsen was on stage with us; he really brought the elephants across the bridge. And I think that that's going to be a long-term bridge span between the industries. And then on the triple-play question, the way to think about this is really down to the simple premise of when a customer loads their budgets into our systems now, they're able to seamlessly run between video and desk -- I'm sorry, video and mobile and desktop with us. So over time, that triple play becomes really important on the programmatic side. And then the second piece is we're offering people very, very significant integrations into both our global content properties, as well as into some of our partners that we have, the other content brands I mentioned. So if you fast-forward 6 months or 12 months or 2 years, what you're going to see is basically customers coming in on really probably what will be a double play, which is loading in programmatic budgets and targeting real-time and getting real-time analytics on it and you'll see basically very deep kind of sponsorship level stuff done at scale on a global basis on the brand side. So right now, that triple play I talked about are the most successful customers. We have a 2-hour meeting every week where we review kind of a McKinsey level detail around our advertising business. I just had the meeting yesterday. And we know very specifically what products people buy, why they buy them and what we need to invest in. My guess is, over time, that will triangulate around programmatic and these big sponsorships. And if I look forward 10 years, my guess is 70% of the spending will be on programmatic and 30% of the spending will be on the content partnerships. Today, it's flip-flopped the opposite. But that will change in the next 10 years and we're investing and looking at it every week overall.

Operator

Your next question comes from the line of Victor Anthony from Topeka Capital Markets.

Victor B. Anthony - Topeka Capital Markets Inc., Research Division

A question on the search business. You called out headwinds in the beginning of the year, maybe you could give us -- tell us precisely what those were. And in the past, you've called out a number of initiatives underway to drive revenue growth in the search business, specifically products you're building with in partnerships with Google, so maybe you could give us a sense of how that's progressing? And secondly, just noticed that you did not buy back any stock in the quarter; maybe you could just give us a sense of why that was?

Timothy M. Armstrong

Sure. In the search business, basically I mentioned it briefly, we had -- we have 2 forms of our search business, 1 is on our owned and operated partners and 1 is on our marketing partners for search. And I think basically, overall, search, we saw a drop in the CPCs overall in general. And the other piece was just we redesigned some of our properties, which we're doing intentionally to improve the long-term viability of those properties, things like the homepage and mail and those things. So I would say we felt -- the headwinds also from Q4, I think Q4 was very successful in terms of the search metrics that we saw. Q1, I think we had a seasonal dip a little bit and then also we did a bunch of redesign and some of the changes that we did there. So we also recovered a lot from search during the quarter and we have very a good relationship with Google. I was just out there recently and met with the Google exec team overall and we're constantly working with them to basically make sure that product-wise, we're improving our products and they give us a lot of guidance on that. And we're giving them feedback on how we're doing overall. So I'd expect search to be a stable business for us. They're just out of the gates in January, we basically had to make adjustments and we made those adjustments overall. So I think that's the story in search. And then on the buyback side, Karen, do you want to?

Karen E. Dykstra

Yes. So regarding the stock buyback side, first, I'd say, as you know, we had a deal in process we're looking at. We also know that Q1 is a low point in cash and have anticipated that. I don't think there should be any indication -- this should be any indication of our interest in buying shares in the future.

Operator

And your next question comes from Anthony DiClemente from Nomura.

Anthony J. DiClemente - Nomura Securities Co. Ltd., Research Division

One question for Tim and one for Karen. Tim, I think if you exclude the $10 million of revenue from Patch in the Brand Group, that year-over-year revenue was about flat. If I just look at third-party data in the quarter, such as the comScore cross-platform data, the AOL-owned properties or AOL Properties did very well, they were up by a lot more than that. So I'm just trying to reconcile in my mind the disparity between some of those metrics and your recurring revenue performance at the Brand Group. Is it persistent display pricing pressure? Is it blended pricing pressure owing to the shift from desktop to mobile? So would love to just figure out how to think about that going forward, that disparity. And then, just a quick one for Karen on the AOL Mail security breach that happened here in this quarter. I mean, should we expect on the membership or subscription side any impact to the business as you look at kind of the key metrics and results for Membership Group in the 2Q?

Timothy M. Armstrong

Yes. Anthony, a few -- there's probably 3 major points there. One is I just want to hit this one directly. Pricing was up very strongly double digits this quarter. So I think we basically have a pretty sophisticated viewpoint on inventory and yield management. And overall, I think that the ads business performed very well in terms of pricing and I think we're seeing all of the things we talked to you guys about over the last couple of years remaining true and becoming more true, which is you properly manage with programmatic and the content brands properties and video, we can see an increase in ad pricing. And again, I'll stick with my statement I think I made in the last call or the call before, which is marketing is going to get more expensive over time, not less expensive. So I think from a pricing standpoint. Second piece is if you exclude the Patch numbers and some of the other things, that onetime item that were in the numbers today, the Brand Group would have been up, not flat, overall. So I think we basically would have seen growth in those properties and growth -- we want that growth to be stronger, but it would have grown. So I think that's actually a positive once you remove those numbers. And the third thing you asked about is the traffic. So our cross-platform traffic was up 26% in Q1 and we're one of the strongest growers in cross-platform traffic, one of the strongest growers in the top companies in that area. And when you think about basically the monetization in the future of that traffic, it's important to note that we're basically monetizing it. Ad pricing's going up. We're basically putting that pipeline together that allows video, mobile and the project -- or, I'm sorry, ONE by AOL to be -- get put together. We like growing traffic and we like the fact our ad prices are growing -- going up. And over time, as we get more and more precise about the yield management side of things, the traffic's growing and ad prices are growing, we expect to have that business grow and you're seeing that overall global advertising grew by 16% overall. So AOL's doing a good job of growing the business and growing the pricing overall. And as traffic grows, I'd expect whether it's on mobile, video or other things for us to capture that upside, and I think we're in a position right now where we're getting better and better at that. So I'd expect over time for that to continue to go up.

Karen E. Dykstra

And to respond to the question on the security, first, I would say, to date, we don't have any indication that the cost of the losses would be material. But the investigation is continuing and we're monitoring the metrics. We're asking about the membership space and the business impact and not the cost necessarily. So right now, we don't have any indication that it will be material, but we will continue to evaluate the situation and whether there's a way to estimate a range.

Operator

Your next question comes from the line of Neil Doshi from CRT Capital.

Neil A. Doshi - CRT Capital Group LLC, Research Division

Tim, comScore has shown very nice growth on the mobile side. What are you doing to drive more mobile usage across your properties and how does mobile usage on core AOL Properties scale versus some of the other sites like TechCrunch and HuffPo? And then on Gravity, how should we think about integration there? It seems like you're seeing some nice lift. What metrics are you looking at that are making you encouraged about the Gravity integration across your platform?

Timothy M. Armstrong

Sure. So on the mobile usage side, we were basically up year-over-year, almost 80% in mobile usage. And if you compare that to kind of the top 10 or 15 companies, we'd be in the top quartile of that group, so mobile usage continues to grow nicely overall. I'd also say from the standpoint of mobile usage, we're still optimizing some of our products and services for that overall and I'd expect our mobile consumer usage to get better. We have a whole bunch of stuff happening with new mobile products coming out. The second thing is there's 2 parts to mobile: there's the mobile traffic we get in our own properties, then there's the mobile traffic we have in the network on syndicated video and in the ads business. And one of the things, because we've been strong in mobile, both growth and O&O, and in the network business, that's why we're getting 52% of our advertisers basically doing cross-platform usage for mobile. So there's a whole series of other things that are happening in our mobile business right now. One is we have a new CMS system that's able to put up mobile experiences very quickly and we tested that out during Q1 at CES with Engadget, and we have other things coming out, that'll be coming out over the next period of time around mobile and mobile CMS products. So I think you'll see us both come out on the O&O side with more and more mobile products and more unified products; and then on the advertisers, syndicated and video side, with more and more mobile products and usage over time. And then on the Gravity integration, Gravity, first of all, we were a customer of Gravity's. And I think from Mitt and team in Santa Monica, they've done a really fantastic job of basically mechanizing it. As much as everyone who's invested in the advertising systems, Gravity has invested in the content systems to the same degree which was anemic for the most part in our industry, and I think they're at the front edge of that overall. And our plan with Gravity was to integrate them across all the AOL Properties, which we're doing. But the real project for Gravity over time is to have it integrated across the entire Internet. And Gravity's tag line is make the web personal and we believe in that overall. If you look at the amount of data, infrastructure, content getting produced on ads getting produced, it doesn't take much to think about the mechanization of how Gravity's improving, the right content for the right user at the right time, the right ad for the right user at the right time. And then the second piece of it output-wise is the real focus around how we think about the individual as an interest graph. I think the real kind of secret behind Gravity is you have the social graph, you've had the search graph. The interest graph is the true representation of who somebody is over time and the interest graph is something that we're going to be able to scale across both advertisers and consumers, but also in our product development cycle. And one of the things I'm most excited about is just on Santa Monica where the Gravity team is. The team already has come up with new products for AOL. Just by being in AOL, I think somebody at the Gravity meeting called it the AOL toolbox of all of the things we have. They're really able to think about our products and services in a holistic way together and I'm really, really excited and really enthused by the team overall.

Operator

That question comes from Youssef Squali from Cantor Fitzgerald.

Youssef H. Squali - Cantor Fitzgerald & Co., Research Division

Two quick questions. Tim, it's interesting to us that you guys announced the Convertro acquisition the same day Google announced the Adometry acquisition basically in the same space. Could you help us maybe just understand the competitive landscape? I think in your prepared remarks, you mentioned Convertro as the leader. I was under the impression that the Google acquisition was larger. So maybe just understanding how -- who the main players are and what made you feel that Convertro was the one. I think you talked about a focus on R&D; was that it or was there something else? And then, Karen, how much of the increase in TAC was from the increase in paid traffic? I think paid traffic this quarter was higher. I think you ended up having to spend a little more on it, and how do you -- going forward, how do we kind of control that? How do you minimize it?

Timothy M. Armstrong

Sure. So the first question is with us announcing the acquisition the same day that Google did, I would look at that as a, first of all, remarkable coincidence overall. But also, the fact that you have 2 of the companies that are leading the mechanization of advertising, which is essentially globally almost a trillion-dollar industry and only, let's say, 10% of it is digitized at this point, you have 90% still to go. If you believe what we have been saying of the last click is not the most important measure and that attribution kind of may be the most important measurement, you're going to have a very long cycle of converting people from -- first of all, converting more people to digital overall. Then you have people converting from last click into exposure to conversion metrics, which is a long-term premise. And I think the fact of the matter is, Google and AOL have different product sets and, in many cases, have different sets in terms of the advertising stack. So I think it's a net positive because basically it's a giant market where all boats are going to rise and you have 2 of the biggest companies basically saying, "This is an important thing." And by the way, coming at it from 2 different angles at the same time, I think it tells you how much value there probably is here. The second piece is, the reason I said Convertro we think is the leader here and we met with the Convertro team in depth, we've spoken to them and, I would say, just to be -- put it at a human level, the most impressive thing I think about Convertro is when you compare them to the other companies in the space, I think they've put the biggest investment into the engineering space around attribution modeling and really thought through all the way through linear TV around it. The second piece, though, that's probably even more impactful and what I really like about the business and the entrepreneurs in that business, they have a great team, is that they started by basically being a customer. They were an advertiser that built their own system to look at attribution modeling because last click didn't make sense to them. So you have a very smart team of people that understand what it's like to be a client in this business, putting giant investments into the engineering side of this and building a system that works for themselves overall. So I think necessity is a great way to invent things and they started from a necessity base thing. They didn't look at the market and say, "This is a giant market, we have to get into it." They started with "How do we attribute our own advertising spend the most effectively?" and then they backed through building a very mechanized platform with machine learning behind it. So I think they're the leaders because I think the future is mechanized and machine-based and they, I think, have a larger set of engineers working on attribution based, mechanized attribution of advertising and they understand it from a client perspective. So I may be biased but I have to put them in a leadership role in attribution.

Karen E. Dykstra

And I think the final part of the question was about our -- you said paid traffic. I believe you mean the -- in search, it increased by -- the TAC increased by $11 million year-over-year and I would say that we have a better search product now and are driving a lot of people to it. We're doing well. That comes with an advertising cost or a TAC and we do make a margin on that business, generally around the 15% to 20% range, and plan on continuing our efforts here. We're pleased with our progress.

Timothy M. Armstrong

So maybe just to wrap up. First, thanks for joining the call. And I think there's 3 numbers that should come out of this phone call that will be memorable in terms of the level of execution we've done and going through the turnaround, getting back to growing and now focusing on growth. One is fifth, one is seventh and one is 11th: Fifth consecutive quarter of growth of revenue profits, consumer traffic; seventh quarter in a row of consumer traffic growth; and 11th quarter in a row of advertising growth. And again, 4 years ago, we had turned around the worst merger in history, had to do major cost reductions, change the strategy, all those things in general and I think you basically have a company right now, from a talent perspective and a focus perspective, which is able to parallel process, continuing to make the company more effective and really focusing in on the growth areas and how to drive growth overall. And I'd say in the second half of this year through 2015 and '16, we're implementing a new objectives-based process with the highest order, top-of-the-mountain objective, of getting this company to industry above growth rates in our businesses, so you as investors know we're dropping revenue profits in consumer traffic growth at a consistent level that's at industry-leading scale. And then the second piece is, making sure that there's clarity and accountability in the execution we're doing as a business. And I would end by saying, teamwork makes a dream work. We are in a position right now as a business where the teamwork level and talent level is something that I'm really happy with. We still have places to improve the company in. But the company is very, very adept at executing now and very good at being precise about what we're doing. And I appreciate the investors staying with us as we've gone through all the iterations in terms of getting to our course on strategy and we're going to continue to do that. We're motivated, dedicated and we're going to keep going as quickly and methodically as we can. So thanks for joining, and we'll see you on the next call.

Operator

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect, and have a good day.

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