John Paczkowski

Recent Posts by John Paczkowski

AOL’s Ad Business Not So Much “Leading” as “Leaden”

The wheels have apparently come off of AOL’s advertising business–not that they were ever really on in the first place. On Wednesday, Time Warner reported a 26 percent decline in second-quarter income as the troubled Internet division continued to weigh on its performance. Revenue at AOL fell 16 percent in the quarter, while ad sales rose just two percent. In contrast, Google (GOOG), Yahoo (YHOO) and Microsoft (MSFT) all reported double-digit ad growth in the same period.

Numbers like that don’t speak well to AOL’s future as a successful advertising venture. And with losses in its access business mounting (604,000 subscribers in the second quarter alone), the division isn’t in the best of health. Little wonder, then, that Time Warner (TWX) announced today that it will indeed split AOL’s dial-up-access business from its advertising and content business. Beginning in 2009, the two divisions will be run independently. “We’ve now made key financial and strategic decisions that will enable us to operate the access and audience businesses separately,” Time Warner CEO Jeffrey Bewkes said on a conference call with investors this morning. “We have the necessary flexibility to do something strategic with either of these businesses today.”

Translation: Either could be sold or merged with another company. And, according to people familiar with the situation, Time Warner hopes to do one or the other with both divisions. The company has recently held informal discussions with Yahoo and Microsoft about AOL’s advertising and content business. And it’s said to be aggressively searching for a buyer for its access business.