AOL Sees Boost in Ad Revenue but Still Bleeding Subs

An uptick in advertising — 44% for 3Q04 over the same period last year — helped AOL improve what Time Warner calls “adjusted operating income” 21% to $450 million from $371 million and nudge the operating margin up 3% to 21%. Company says the ad growth was spurred by a mix of paid search (up 70% to $30 million) and the closing of the Advertising.com deal during 3Q. But broadband subs continue to slip, dipping 646,000 to 22.7 million and further illustrating the reasons for the upcoming layoffs. The only plus-signs for subs came from the limited/bring-your-own-access packages.
Time Warner’s other broadband story paints a brighter picture with TW Cable picking up 168,000 HSD subs to reach 3.7 million and digital phone on track for deployment across all divisions by Dec. 31. … If you’re trying to figure out where non-AOL Internet content fits in on the TWX financial foodchain keep this in mind: the only mention I could find of the company’s websites in the earnings release was the corporate url.

Not Bad for a Dying Business…Fulcrum Global Partners’ analyst Richard Greenfield says AOL’s 3Q04 was “not a bad quarter for what many continue to believe is a dying business.” He estimates AOL will bring in at least $320 million in ’04 from paid search, up from $200 million in ’03 and $30 million in ’02. Ad/search should do even better with the ’05 opening of AOL.com to non-members as a free sit and revenue driver. Greenfield also notes that the quarter-to-quarter cable broadband increases at TW Cable (32%) didn’t come close to those achieved by Cox (89%) and Comcast (63%).

Related:

Washington Post says AOL to cut more than 700 jobs

AOL To Buy Advertising.com For $435 million

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