AOL's Display and Search Ads Suffered in Q2

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AOL experienced a sickening 21 percent drop in its second quarter ad revenue, owing to pain in both paid search and display advertising.

AOL's display ad revenue on its own sites dropped 19 percent. Execs said a larger portion of premium inventory on AOL.com and other in-house properties went begging. As a result the company had to sell it through ad networks, resulting in lower prices for the real estate.

Yet the company's ad network business struggled too, as higher prices were countered by falling demand for remnant inventory. Third party network revenue was down 26 percent, to $124 million.

The picture wasn't much brighter for AOL's search business, where revenues decreased 13 percent on lower click prices and query volumes.

Execs said Time Warner is on track to complete the spin-off of AOL before the end of the year. Three weeks ago it repurchased Google's 5 percent stake in the company, and earlier this week the company filed a registration statement with the Securities and Exchange Commission.

"Separating AOL will benefit both companies � enabling Time Warner to concentrate fully on our core content businesses and improving AOL�s operational and strategic flexibility," said Time Warner CEO Jeff Bewkes. Also today, IAC posted Q2 results indicating weakness in both search and display. In addition to weakness in display, a decline in revenue at Citysearch reflected issues was related to the relaunch of the site and the integration of a new ad serving system, the company said.

IAC search revenue declines reflected lower cost-per-click prices but were also impacted by the relaunch of Ask.com, which reduced the number of queries in order to deliver results faster, IAC said.