AOL's Slowing Ad Revenues a 'Hiccup', Still Embracing Advertising Model

| About: Time Warner (TWX)

A slowing of advertising revenue growth in Q2 at AOL amidst its now year old restructuring plan was a "hiccup," not a "radical disruption" to business, says AOL chief Randy Falco. AOL's ad revenue grew by only 16% in Q2 -- after previous quarters of 40% growth -- lagging the industry's average growth of 21%. TWX 20 08 2007 Chart AOL president and COO Jeff Bewkes had told investors on May 31, that "we believe, and our plans are, that we're going to grow ad sales faster than the industry." AOL cites redesigns of portal channels and a new method of displaying search results for the slowdown. However, Falco told reporters, "In the first six months of the year, we have accomplished more in terms of a turnaround, in terms of fixing products and the platform, than in the past three years." Falco also said Advertising.com (acquired in 2004) is now its fastest growing unit and its brand "... might become more important than the AOL brand itself." Time Warner, which owns 95% of AOL, gained a modest 0.4% to $18.29 in Friday's broad market rally.

Sources: FT.com I, II, New York Times
Commentary: AOL: A Mistake to Go Free?AOL Moves Deeper Into Online Advertising with Tacoda AcquisitionCan AOL Take Behavioral Targeting from Concept to Reality?
Stocks/ETFs to watch: TWX. Competitors: GOOG, MSFT, YHOO
Earnings call transcripts: Time Warner Q2 2007

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