The profit was at the low end of the average of $0.32 – $0.34 that analysts had been predicting, while AOL’s $538.3 million in revenue was slightly above expectations.

Update: the market does not like the EPS. AOL share prices are off more than 10% this morning.

Overall, the numbers reflect an ongoing turnaround at AOL, which for years had been depending on its legacy dial-up subscription business for profit as its content and advertising business struggled. In March, CEO Tim Armstrong said recent results validated the company’s focus on content.

The most encouraging sign for the company may be a 14% growth in revenue in its so-called brand group, which consists of its in-house media properties like the Huffington Post, AOL.com and TechCrunch. AOL networks, which represent its third-party advertising service, was also up 8%.

The biggest question for the company remains profit where the company continues to depend on its shrinking legacy business to pay the bills. Both the ad networks and brand group continue to lose money, in part because sites like Patch.com continue to be a drag on earnings. This is reflected in the following screenshot, showing revenue and adjusted OBITDA:

If there is a dark spot here, it is the fact that, notwithstanding revenue growth, AOL still depends on its historic business of selling dial-up subscriptions. While losses in the brand group shrank by 71%, they are still losses — and the tech-heavy AOL Networks, in which AOL has invested significantly, is losing money too. Here’s how the company’s earnings release explains the profit situation:

“While significantly improved, Brand Group Adjusted OIBDA remains negative reflecting our investment in Patch and in our editorial and engineering staff at our core brands and in our sales force domestically and internationally [...] AOL Networks Adjusted OIBDA decreased year-over-year due to higher research and product development costs primarily related to continued investment in Adlearn Open Platform (our demand-side platform) and the launch of AdTech MARKETPLACE (our supply-side platform).”

Update: an earlier version of this story cited analysts’ prediction as $0.32; I’ve updated to also to refer to a separate consensus account of $0.34

In a post announcing the launch, editor-in-chief Arianna Huffington noted that “when it comes to media, Japan presents unique challenges and opportunities.” Mobile permeates the market, and “the Japanese are voracious users of social media and social-networking sites — not only Facebook and Twitter, but smartphone [social messaging] services like Line, Comm and Gree.”

Along with topics like zen meditation, tea ceremonies and crying baby contests, Huffington notes that HuffPost Japan will be covering “one of my favorite subjects, sleep — from capsule hotels to the abundant photoblogs of people sleeping on trains.”

If nothing else, the incident helps reinforce just how blurry the line is between plagiarism and sloppy attribution — and also how the the web makes it easier to provide attribution via hyperlinks, but at the same time makes it harder to define what is plagiarism or content theft and what isn’t.

To Jeremy Duns, who first blew the whistle on what he said was Thayer’s plagiarism, the case seemed open and shut: chunks of the article about North Korea and basketball, including a number of quotes, appeared to have been lifted straight from a piece by San Diego Union-Tribune writer Mark Zeigler on the same topic in 2006. And there was virtually no attribution of any kind in the original version of Thayer’s story, which appeared at the NKNews.com site, apart from one oblique reference to the Union-Tribune — and no links.

Is a small link to the source enough?

Even as Duns was writing his blog post about this incident of plagiarism, however, links began to appear in the Thayer piece, including a link to Zeigler’s original story. To Duns, this was evidence that the author was trying to cover his tracks, but in a comment to Columbia Journalism Review, NKNews editor Tad Farrell said that the lack of links was due to an editing error and that the site added them as soon as it could. Thayer vehemently denied that he was a plagiarist or that he intended to leave out the attribution.

So all’s well that ends well, right? In a follow-up post, the CJR’s Sara Morrison said that Duns clearly jumped to the wrong conclusions (since at least one of those who provided a quote that Duns questioned confirmed that they had in fact talked to Thayer for his piece). Duns wasn’t buying it, however, saying the attribution and links were only added later under protest. As he put it:

“Even hyperlinking to such a huge lift without mentioning the publication or author at all would have been something of a stretch – it’s a hell of a lot of material taken directly to cite with just one bolded word.”

Interestingly enough, Zeigler wasn’t all that satisfied either: although he said he wasn’t prepared to call Thayer a plagiarist, he didn’t think a couple of small links were enough to give him the appropriate attribution for his work. As he put it: “I don’t think just highlighting a few words of type in a different color necessarily qualifies as a proper attribution,” adding that his story “took a lot of work and a lot of man hours” to report and write.

The problem is that while adding hyperlinks is a great way of avoiding a charge of plagiarism — something that might have helped Fox News opinion writer Juan Williams and other alleged plagiarists — there is no accepted protocol for how or where to add those links, or how much content someone can cut and paste into their story or blog post without crossing the line from borrowing into plagiarism or copyright infringement.

How much content is too much to take?

This is also the root of the controversy over what some call the “over-aggregation” by sites like The Huffington Post and Business Insider, where large chunks of stories from other sites — and in some cases, the entire story or post — is published, along with a “via” link somewhere at the bottom of the post. Other blogs, including The Verge and Engadget, have been criticized in the past for burying links to the original source of the content they reproduce, to try and disguise what they have borrowed.

And if you broaden the lens even further, a similar problem is at the root of the fight that Google has been up against in country after country over its use of excerpts from news stories in Google News — stories that come from newspapers and other traditional sources. Germany has passed a law to control the use of such excerpts, even those as short as a single word, and in other countries like France and Belgium, those traditional outlets have sued Google to try and force payment for that content.

Google’s defence is that it links prominently to the original source, and this drives traffic to the publisher’s site, which is fundamentally the same argument that Business Insider and Huffington Post and others use to defend their aggregation of content. But those whose content is used argue, as Brian Morrissey of Digiday did in a back-and-forth with Business Insider founder Henry Blodget, that taking their content produces far more value for the aggregator than it provides in return.

So it seems that when it comes to making use of someone else’s content, linking as a way of providing attribution and credit is enough — except when it isn’t.

Images courtesy of Shutterstock / Zurijeta and Arvind Grover

The article that The Atlantic wanted Thayer to repurpose was a long feature about how the relationship between North Korea and the U.S. revolves around basketball, pegged to a recent trip by American basketball star Dennis Rodman. Olga Khazan, a relatively recent addition to the Atlantic‘s editorial staff, sent an email asking Thayer to submit a shorter version for the magazine, and when the writer asked how much the Atlantic was prepared to pay, the editor said zero — but offered exposure as an inducement:

“We unfortunately can’t pay you for it, but we do reach 13 million readers a month. I understand if that’s not a workable arrangement for you, I just wanted to see if you were interested.”

The economics of writing have changed

Needless to say, Thayer was a little offended at this, as he describes on his blog (he also provided a somewhat more colorful response to New York magazine). For Thayer, and for many who responded both on his blog post and on Twitter, this was just another sign of how far the media have fallen, and how little people value good writing. Eventually, the Atlantic‘s editor-in-chief apologized for offending the writer, saying the case was “unusual,” and that all the editor was trying to do was help Thayer’s work find a larger audience.

Atlantic to freelancer: We'd like the milk and cow for free, please. bit.ly/WGApbv

—
david carr (@carr2n) March 05, 2013

Felix Salmon tried to analyze what happened to Thayer in a blog post at Reuters, and came to the conclusion that freelancing is a lot harder to make a living at than it used to be — in part because online media works in such a way that having staff writers is a lot more efficient than using outside contributors. But I think he missed the most important aspect of what Thayer’s treatment says about the practice of writing now, and the economics of digital media (writer and editor Jane Friedman has a good overview of the issues).

In some ways, it’s odd that the Atlantic would even bother to ask Thayer for permission to run a condensed version of his piece: many outlets would have simply excerpted large chunks of it with links back to Thayer’s original — the way that GlobalPost did — since that costs nothing and achieves virtually the exact same thing (Thayer even mentions this possibility in his blog post). Whether you believe this is right or wrong, it arguably serves a purpose in the media ecosystem. And we are more or less stuck with it, whether you like it or not.

Some will always be willing to work for free

As former YouTube staffer Hunter Walk pointed out on Twitter, and Matt Yglesias noted at Slate, there is no shortage of free writing out there — in fact, the supply of free writing is theoretically infinite, since there will always be people who want to write and are willing to be compensated in other ways: by broadening their reach, enhancing their reputation, etc. This is why new publishing platforms like Medium and Svbtle are having some success, not to mention the rapidly expanding LinkedIn “Influencers” program.

People write for free. Happens all the time. So if you run a magazine and you're *not* asking people to write for free you're doing it wrong

—
Farhad Manjoo (@fmanjoo) March 05, 2013

This same process was famously — or infamously — also the foundation of The Huffington Post, and sparked a huge amount of controversy about that company’s practice of not paying its bloggers. As a number of people pointed out at the time (including me), there will always be people who want to write for free, and that’s not necessarily a bad thing. Unless, of course, you are one of those writers who used to profit from the lack of marketplace competition.

When it comes to things like media, your real competition isn’t the product that is better than you, but the one that is good enough to satisfy your customers — and if readers are happy to patronize media outlets that use writing they got for free, or writing they have aggregated and excerpted, there is precious little that freelance writers or any of us can do about it. Our only option, as a number of commenters at Hacker News pointed out, is to make it clear that we want better quality writing by actually paying for and/or clicking on it.

The part that Thayer and his supporters aren’t talking about is how much easier it is for writers of all kinds to make a living if they want to — not by submitting their work to a handful of traditional outlets, but by turning it into e-books and Byliner singles and other formats, something that has expanded the field of writing more than just about anything since the printing press. Are there new economics for writing? Yes. Are they unrelentingly evil and negative? No.

Images courtesy of Shutterstock / patpitchaya and Poynter

Thursday’s ruling comes as part of a case that begin in early 2011 when two Democratic political operatives, Peter Daou and James Boyce, filed a lawsuit stating that they had presented the idea for HuffPo in 2004. The pair claim that Huffington and Lerer then cut them out of the process, launching the site in 2005 and claiming the idea as their own.

In October 2011, New York Supreme Court Judge Charles Ramos threw out seven of eight claims in the case but allowed one claim — based on the state claim of idea misappropriation — to go forward. Since then, the parties have been wrangling over procedural issues and Daou and Boyce filed an amended complaint.

In addressing the amended complaint, Ramos allowed the idea theft claim to go forward as well as those for fraud and unjust enrichment; he tossed a fourth claim for breach of implied contract.

“Plaintiffs have adequately alleged that defendants took the information that plaintiffs provided, secretly shared it with another person, camouflaged the origin to make it appear as it came from that other person and, in effect, stole the idea and developed it with that other person,” Ramos wrote in letting Daou and Boyce go forward with the fraud claim.

In the same ruling, Ramos rejected Daou and Boyce’s request to subpoena the CEO of AOL, Tim Armstrong, rejecting arguments that Armstrong had essential knowledge about the founding of the Huffington Post. AOL bought the Huffington Post for $315 million in the spring of 2011.

Today’s ruling does not mean that Daou and Boyce have won the case. Instead, it means they have cleared a crucial procedural hearing and, thanks to the added claims, can proceed to a trial with a stronger hand.

“The court has made only a preliminary decision based solely on the uncontradicted allegations of the complaint and without any consideration of the proven facts,” a Huffington Post spokeswoman said. “As we have said from day 1, there is no merit to these allegations. They are make believe. With this ruling, we will now be able to move for summary judgment and lay out the actual evidence in this case. We look forward to the opportunity to present the full record to the court.”

Here’s the ruling:

Order upholding HuffPo complaint.pdf by

This story was updated at 8:30 p.m. ET with a statement from the Huffington Post and at 9:30 p.m. ET with a slightly updated version of the statement from the Huffington Post.

Then something happened. The company’s revenues grew, its share price soared and CEO Tim Armstrong revealed a strategy to make AOL a media and advertising powerhouse. The company’s winning streak continued Friday morning as Wall Street greeted AOL’s latest earnings report with glee; the stock shot up another 12 percent when markets opened.

“We’ve walked through the the value of the turnaround and got to growth,” Armstrong said on a morning call with investors.

It’s too soon to say the company’s back on top but, for now, the results look like the real deal. Here’s why: as analysts fussed over AOL’s debacle with hyper-local site Patch and its dwindling dial-up business, the company quietly invested in state-of-the-art ad technology and rejigged AOL to inject new revenue streams. The most important of these are inside the AOL Networks group — a business unit that offers ad tech tools to publishers and advertising agencies that are still learning to navigate the world of automated ad buying. The Networks group grew 37 percent year-over-year and posted revenue of $183.5 million in Q4. (Total revenue for AOL in the quarter was up 4% from a year ago to $599 million; adjusted OIBDA income was down 7% to $123 million).

During this time, AOL has also become number two in online video thanks to products like HuffPo Live; this is significant because video is one of the most lucrative forms of online advertising. AOL now plans to draw on its fancy ad tools to create automated buying for its own video inventory while, at the same time, offering those tools to other companies who are still catching up on the video front.

Meanwhile, AOL’s media properties don’t look as dysfunctional as they did a year ago. Armstrong appears to have figured out how to manage the mercurial Arianna Huffington and, as for his pet project Patch, the hyper-local site is still losing money but he promises it will be profitable by the end of  the year.

The bottom line is that AOL has three major revenue streams, all of which look viable. There are still danger signs, of course: AOL’s display ad business looks shaky and, as Henry Blodget points out, the company’s revenues may come from three streams but nearly all of the profit is still coming from the legacy subscriber businesses.

But, for now, investors are right to like what they see. People looking for 2013′s turnaround story should stop fussing over Yahoo — it’s AOL that is poised to be this year’s comeback kid.

Correction: an earlier version misstated the sale of AOL’s patents; this has been corrected to say the patents were sold to Microsoft (which in turn sold them to Facebook).

Disclosure: GigaOM distributes some video content through AOL.

(Image by Rob Hainer via Shutterstock)

Maymann, who co-founded a content distribution company acquired by AOL in 2011, will be tasked with growing traffic and revenue at Huffington Post and at the site’s big video investment, HuffPo Live.

He will report to the site’s founder, Arianna Huffington, who is now president and editor-in-chief and with whom Maymann has worked closely in building HuffPo’s international brand.

AOL bought the Huffington Post in February of 2011 for $315 million, a move that surprised media watchers and that set off drama and turf wars as top figures jostled for position. In recent months, AOL has been hitting its stride as it appears to have found a way to manage its media properties like Huffington Post and TechCruch from a distance.

Maymann recently spoke to my colleague Robert Andrews at a media forum in Monaco where he stressed that independent operations were the key to the HuffPo’s brand and success. You can find more of his observations and an audio interview here.

Update: Many of these sites were impacted when Con Ed shut off power to lower Manhattan.

Gawker is temporarily down because the 57th Street Crane just flooded our servers with sea foam, or something. Back with you shortly.—
  (@Gawker) October 29, 2012

Due to #Sandy we're experiencing technical difficulties and are working to be back up as soon as possible.—
Huffington Post (@HuffingtonPost) October 29, 2012

Pushing out stuff through Twitter, Facebook and Tumblr while we resolve our site issues, you guys! Follow and like us.—
  (@BuzzFeed) October 30, 2012

BuzzFeed and Gawker are down. You may experience an unfamiliar emotional reaction to events. This is known as earnestness and should pass.—
  (@pourmecoffee) October 29, 2012

Daily Kos servers being powered by generators.—
Markos Moulitsas (@markos) October 29, 2012

Con Ed has started shutting off power in Brighton Beach and parts of lower Manhattan bit.ly/XJdxed—
NBC New York (@NBCNewYork) October 30, 2012

#ConEd Manhattan outages were caused by flooding in company substations and engineers are working hard to correct the problem—
Con Edison (@ConEdison) October 30, 2012

To put the media outages into perspective, more than 3 million people in the storm’s path have no power, according to The Weather Channel’s Hurricane Central.

Stay tuned for updates.

Update 2 (1:15am ET): Gawker is still down completely, and BuzzFeed has only partially recovered, with many story pages still unavailable. The site’s team is instead using Tumblr to update its readers on the hurricane.

The latest attack on Bleacher Report came last week in a long SF Weekly article, which said that the network “floods the web with inexpensive user-generated content” and is “a long way from any quaint notions of journalism.” The story includes a number of examples of what it says is the kind of sloppy writing that comes from BR’s volunteer contributors, and the author criticizes the network for focusing on cheap SEO (search engine optimization) tactics, such as “reverse-engineering content to fit a pre-written headline” that is stuffed with popular keywords in order to attract clicks.

Unpaid writers “competing for virtual crumbs?”

The SF Weekly piece also spends a lot of time talking about how a majority of Bleacher Report’s traffic is driven by unpaid writers — like the 19-year-old who admits to author Joe Eskenazi that even he doesn’t really buy the headline on his post. The obvious implication is that the network is nothing but a content farm filled with day laborers who churn out posts to fill a quota, and are encouraged by the “virtual badges” they earn for posts rather than an actual salary. As the piece describes it: “Unable to earn actual crumbs, they compete for virtual crumbs.”

Ryan Chittum at the Columbia Journalism Review characterizes the network in much the same way in a post based on the SF Weekly piece, saying Bleacher Report is engaged in a “race to the bottom.” As he puts it:

“Bleacher Report is a sort of Demand Media of sports, a content farm engineered to get search engine visits with lowest common denominator clickbait.”

These criticisms about Bleacher Report aren’t really a surprise — after all, they have been made about virtually every other digital-media entity from Demand Media and The Huffington Post to BuzzFeed: the idea that user-generated content is just a sop to readers in an attempt to bolster SEO-driven metrics, and that it is an endless rush towards the bottom with little or nothing of actual value to add to either media or journalism.

And as the SF Weekly story notes, even Bleacher Report insiders to some extent acknowledged this: the magazine quotes from a speech given by King Kaufman, who was hired last year by the network to upgrade its editorial standards, in which he says that BR had gotten a reputation for “lowest-common-denominator crap.” Of course, the article also fails to mention that Kaufman and his team have spent a considerable amount of effort on boosting the quality of the network, to the point where it is actually more stringent about things such as plagiarism than mainstream outlets like ESPN.

An alternate route to a career in writing

Not only after the SF Weekly article appeared, someone else added an interesting — and I think important — perspective to the picture: Matt Miller, a senior writer for Bleacher Report’s NFL unit, described how he went from being a would-be sports writer with no experience to a member of the senior team at the network, based solely on his contributions to the site. As he put it:

“Fast-forward to today. I’m no longer in marketing, I now work full-time for Bleacher Report as an NFL Lead Writer. I have benefits and vacation time. I have a salary. I have these things because I was able to work my way to the top at B/R. I wasn’t handed a job based on my résumé.”

This is part of the problem with the traditional media response to “content farms” or user-generated media sites like Huffington Post and Bleacher Report — the sense that they can’t possibly be as worthwhile as a regular content operation because people are writing for free, and therefore the only possible value has to be the creation of low-quality content for cheap traffic purposes. But what about the writers? Why do they do it? And isn’t there value there as well?

Miller’s account makes it clear that there is value: unlike the old days of traditional media, where writers had to toil for years in dead-end jobs with newspapers or magazines or trade publications before some of them could be “discovered” and elevated to the higher ranks of the profession, sites and networks like Bleacher Report, Huffington Post and BuzzFeed give anyone the ability to rise to whatever level their writing ability justifies.

Is the content produced by places like Bleacher Report the equivalent of a mainstream outlet like ESPN or the New Yorker? In most cases, no — but does that mean it is of no value? Of course not. Readers seem to like it, and who are we to say they are wrong? Not only that, but Miller makes the point that he and many other writers see a lot of value in what they have done, even if that value isn’t recognized by members of the mainstream media, because it allows them to bypass the traditional barriers that used to encircle journalism. And isn’t that ultimately a good thing?

Post and thumbnail images courtesy of Flickr users D. Miller and Yan-Arief Purwanto

I don’t want to give the impression that I think having a public editor is a bad idea, because that’s not the case at all. The NYT and other newspapers who have this kind of ombudsman role are at least trying to do a better job of interacting with readers and paying attention to issues that involve the paper, which is frankly a lot more than some publications do. And the New York Times has tried hard to structure the job so that it can remain independent while still being part of the newspaper: the public editor is appointed by and answers to the publisher, Arthur Sulzberger Jr., so that he or she can criticize the editorial side of the operation without (theoretically) having to worry about keeping his or her job.

Since she took over the role, Margaret Sullivan has made a point of involving not just editors and writers at the paper, but also pulling in comments from interested readers and other outsiders on Twitter, and linking to as many different sources of reaction to the NYT’s behavior as possible. As she describes her job in a recent post:

“I intend to blog frequently and to use social media outlets like Twitter to expand the sphere and invite other voices in. I’ll also sometimes comment on journalism outside The Times, both for comparative purposes and because I think it will interest readers.”

The role of an editor should be public by default

All of that is good, and so far Sullivan has done an admirable job of responding to criticism about a number of topics, including why the Times didn’t do more on its front page about the anniversary of September 11 and also the coverage of gender issues. She talks to the editors involved and gets their reaction, and that is valuable — but why can’t we hear from those editors directly? If readers are complaining about a lack of coverage of a certain issue, or the way in which the newspaper is leaning to the left (as departing public editor Arthur Brisbane alleged in a controversial post just before his departure), why can’t an editor who is actually involved in those decisions respond somewhere?

There are some great examples of New York Times journalists who interact with readers and critics directly all the time, using Twitter and other outlets including their Tumblr blogs. Media reporter Brian Stelter is one: not only does he use Twitter extremely well, but he has also done some pretty interesting stuff with his Tumblr blog during breaking-news events such as the tornado last year in Missouri. As I argued at the time, that kind of effort breaks down a lot of the walls that still exist between “traditional” journalists and what Jay Rosen has called “the people formerly known as the audience,” and I think that is ultimately a good thing.

Assistant managing editor Jim Roberts is another example of someone who is trying hard to use Twitter as a way of listening to readers and outside sources, and of interacting with them as well. As he described in a recent interview with Talking Points Memo, the benefits of doing this are many-fold: Not only do journalists get a better sense of what kind of reaction their work is getting, but the paper as a whole benefits — since it is seen as being interested in what readers think and in engaging with them. Says Roberts:

“I often keep an open feed of @NYTimes mentions, just so that I can see what our readers are talking about. I think that’s a really, really valuable piece of real-time feedback. There are quite often things I see in there where people are either praising, or, you know, in some cases, criticizing our work that I think is very valuable for me to know as an editor.”

Connecting with readers isn’t just nice, it’s essential

This kind of engagement is more than just a buzzword, or some touchy-feely recipe for social-media success: As I tried to point out recently, newspapers and other traditional media have to spend more of their time trying to get to know their readers better if they are going to rely on them for an increasing amount of their revenue — which papers with paywalls like the New York Times are essentially doing. How better to build that relationship than by interacting with and responding to readers directly? If Margaret Sullivan is the only one who does this, then Margaret Sullivan is the only one who will have a relationship with NYT readers.

I can almost hear editors at newspapers everywhere saying: “We don’t have time to interact with readers — we are busy focusing on our journalism, and we are already overworked.” This was a constant refrain when I worked for a newspaper as the online “community editor,” and it continues to be a standard fall-back position in the industry. But does it really take that much time to do a search on Twitter and respond to comments now and then, or to write a blog post to say that you are listening and you have given readers’ concerns some thought? Couldn’t you miss another layout meeting or some refresher course on headline writing to do that?

One of the things that blogs are good at — and blog-derived new media outlets like The Huffington Post — is speaking directly to readers whenever there is something worth discussing, and editors at plenty of online outlets do this routinely. There may be the occasional pissing match or overly emotional response, but that comes with the territory. And even if it occasionally goes too far, it is better than the ivory-tower style institutional response that people routinely get from their newspapers. That approach is not doing newspapers any favors as they try to fight the ongoing decline of their traditional business models.

Post and thumbnail images courtesy of Flickr users Rosaura Ochoa and jphilipg