AOL's ad revenue growth stalls

Summary:Time Warner's AOL unit delivered results in line with expectations Wednesday, but revenue in the first quarter was $1.3 billion, down 23 percent from $1.

Time Warner's AOL unit delivered results in line with expectations Wednesday, but revenue in the first quarter was $1.3 billion, down 23 percent from $1.46 billion and operating profit fell 74 percent to $284 million from $1 billion a year ago.

AOL's results (see Time Warner statement) are closely watched as it's a player in the Microsoft-Yahoo scrum (all Microhoo coverage). AOL is floated as an alternative for Yahoo to fend off Microsoft. Meanwhile, if Microsoft walks it could buy AOL. After all, Time Warner, which is spinning off its cable television unit, would be more than happy to unload it. The larger question is whether AOL makes sense for Yahoo or Microsoft.

"We maintain our position that Time Warner would be better positioned for growth following a full divestiture of AOL," said UBS analyst Michael Morris in his earnings preview. AOL was in line with his estimates.

Also see: Is AOL a viable option for Yahoo against Microsoft?

Spin patrol: Curious timing on AOL’s ‘we’re growing like gangbusters’ announcement

AOL's revenue fell largely because of the 38 percent decline in its subscription business, but what is worrisome is that ad revenue was only up 1 percent from a year ago. AOL said its ad revenue "reflected growth in sales of advertising on third-party Internet sites, fueled in part by acquisitions, and paid-search advertising, offset mainly by a decline in display advertising."

This ad figure indicates that last week's AOL rah rah session was designed to offset this poor growth rate.

AOL averaged 110 million monthly domestic unique visitors.

Topics: Microsoft

About

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

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