AOL ad revenue plummets in Q1
Time Warner seeks to spin off the Internet company
IDG News Service - AOL LLC's ad revenue fell 20% in the first quarter year-on-year, another troubling sign that its transformation into an advertising-supported business is off track.
At the same time, parent company Time Warner Inc. is looking for alternatives to spin off the struggling Internet unit.
While the recession has affected online ad spending, AOL's drop is still steep. By comparison, Google Inc., which generates most of its money from online ads, grew its revenue 6% in the first quarter. Yahoo Inc., another online ad powerhouse with significant problems of its own, had a 13% contraction in first-quarter revenue.
The problems in AOL's online ad business appear widespread. In its 2009 first-quarter earnings report today (download PDF), Time Warner said that AOL registered revenue declines in ad sales on external sites, as well as in display and paid-search ad sales in AOL sites.
In a filing today with the U.S. Securities and Exchange Commission (download PDF), Time Warner said it's still reviewing its "strategic alternatives" regarding AOL.
Although Time Warner's board hasn't decided on this possibility, the company said it "anticipates" that it will start a process to spin off "one or more parts" of AOL's business to Time Warner stockholders. However, market conditions may lead Time Warner to seek alternatives other than a spin-off, according to the filing.
Talks about a possible AOL divestiture by Time Warner have been rumored for years, and the issue has been discussed by Time Warner executives in the past.
Overall, AOL's revenue, which also includes subscription fees, fell 23% to $867 million, while operating income tumbled 47% to $150 million. Time Warner blamed its first-quarter 7% revenue fall partly on AOL's financial performance.
Time Warner booted Randy Falco from his post as AOL CEO last month, replacing him with former Google executive Tim Armstrong.
Under Falco, who took over in November 2006, AOL routinely failed to grow its ad revenue on par with the industry average. Falco's tenure included two major rounds of layoffs: 2,000 employees, or 20% of AOL's staff, in October 2007, and 700 employees, about 10% of the staff, in January.
AOL has been on a years-long process to move from a business model based on dial-up Internet-access fees to an online advertising- supported model. However, since early 2007, AOL has consistently underperformed in online advertising.
For example, in 2008, U.S. online ad spending grew 11%, according to the Interactive Advertising Bureau, but AOL's online ad revenue dropped 6%.
- Best iPhone, iPad Business Apps for 2014
- 14 Tech Conventions You Should Attend in 2014
- 10 Desktop Apps to Power Your Windows PC
- How to Add New Job Skills Without Going Back to School
- Slideshow: 7 security mistakes people make with their mobile device
- iOS vs. Android: Which is more secure?
- 11 sure signs you've been hacked
- The 12 PCI DSS 3.0 requirements addressed by Peer 1 Hosting This handy quick reference outlines the 12 PCI DSS 3.0 requirements, who needs to be compliant and how Alert Logic solutions address the...
- Alert Logic for PCI DSS Compliance To achieve PCI DSS compliance, you must identify and remediate all critical vulnerabilities detected during PCI scans. Threat Manager streamlines this process by...
- Accelerating Network Convergence in Virtualized and Cloud Data Centers Adopting a converged networking strategy enables organizations to traffic server and storage I/O workloads on consolidated data throughput channels. Intelligent software helps optimize...
- How 10GbE Network is the Backbone of the Virtual Data Center The shift to a virtual data center has put tremendous strain on legacy networks; driving the need for more speed, lower latency, more...
- Live Webcast Best Practices for the Hyperconverged Enterprise Network To the Age of Constant Connectivity and Information overload
- Getting Ready for BlackBerry Enterprise Service 10.2 Find out how BlackBerry® Enterprise Service 10 helps organizations address the full spectrum of EMM challenges, while balancing the needs of both the...
- Containerization Options: How to Choose the Best DLP Solution for Your Organization This webcast outlines a framework for making the right choice when it comes to containerization approaches, along with the pros and cons of... All Networking White Papers | Webcasts