One Step, Then Another For AOL

Time Warner  announced its third-quarter results today, including a look at how far its AOL division has to go before bridging the gap between its former ISP business and new focus on content-driven advertising revenue.

AOL’s revenues declined 3 percent ($58 million) to $2 billion in the
third quarter compared to the same time last year. Time Warner said the decline was due to a 13 percent decrease ($210 million) in subscription revenues.

But the company also said the decline was due primarily to a decrease
in domestic AOL brand subscribers who were expected to abandon the
service when the company decided to offer it for free.

Those subscribers were supposed to stop subscribing and start looking
at advertisements.

So it may be good news for AOL that the decline in subscrition revenue was
partly offset by a 46 percent increase ($151 million) in advertising
revenues compared to the same, year-ago quarter.

The company said advertising revenues reflected strong growth in
sales of advertising run on third-party Web sites generated by
Advertising.com, as well as display and paid-search advertising.

“We’re particularly encouraged by AOL’s early progress in making the
transition to an advertising-supported business,” Time Warner’s Chairman and Chief
Executive Officer Dick Parsons said in a statement.

The transition has been a noisy one, played out in
the daily papers for months before AOL made its fee-to-free move official.

Shortly after the company did make the announcement, along with a
flurry of free product offerings, StopBadware.org crashed the party by listing AOL version 9.0 on its
list of software users should avoid downloading.

The organization, sponsored by Harvard Law’s Berkman Center for Internet & Society, argued that AOL installed the AOL toolbar and icons to Internet Explorer (IE), links to the RealPlayer homepage and the Real.com radio tuner in the IE favorites list, as well as an AOL Deskbar to the user’s taskbar — all without letting the user know.

The company’s next release, AOL OpenRide, answered many of StopBadware’s complaints about privacy.

Time Warner also announced a 10 percent decline in total costs for its AOL
business. AOL’s decision to prioritize its advertising business
resulted in lower marketing expenses, due to reduced subscriber
acquisition spending.