AOL’s Disappearing Ad Revenue: Down 20 Percent
Anyone want to buy an Internet company with plummeting ad sales?
That’s Time Warner’s AOL, at least for now: Tim Armstrong’s new company saw ad sales drop by 20 percent in the last quarter, following up on a quarter in which they plummeted 18 percent. Overall, AOL revenue dropped 23 percent.
Perversely, the good news for Time Warner (TWX) and Armstrong is that AOL’s woes are self-inflicted. The rest of the Internet ad industry is suffering too, but not nearly as much as AOL, where the previous management changed sales strategy and leadership several times and screwed up the company in the process.
So it shouldn’t be hard for the Google (GOOG) sales vet to show some improvement by the end of 2009, which will be part of Time Warner’s sales pitch as it prepares to spin off the Internet company. And AOL will also get a boost this year as Google and Microsoft (MSFT) compete for the rights to the company’s search business, which Google currently owns.
Unlike Google’s arrangement with News Corp.’s (NWS) MySpace, the AOL pact is valuable for Google, and the competition for a new search deal will help serve as an advertisement for AOL itself: See? This huge audience is still worth a lot of money!
Meanwhile, it’s hard to find a positive spin at Time Warner’s Time Inc. publishing unit. Revenues were down 23 percent, and ad revenues were down 30 perecent–an acceleration from the previous quarter, when ad revenues were down 20 percent.
In this case, those results are roughly in line with the rest of the magazine industry, which had a wretched first quarter. And given that many of Time Inc.’s peers are now going through a second wave of cost-cutting measures after making initial cuts last fall, it wouldn’t be a shock to see Time Inc. contract some more this year. More on that here.
If you’re keeping track, by the way, Time Warner’s overall performance–earnings of 55 cents a share on revenue of $661 million–topped Wall Street’s estimates. And the company left its 2009 guidance unchanged.
Click on the table below to see the breakdown. Full results here.