More NewsAOL Sees Ad Growth

AOL Sees Ad Growth

Ad revenues grew for the first time since 2001, led by paid search.

Time Warner reported strong second quarter results on Wednesday, with across the board growth in revenue and operating income from all its business segments. America Online’s advertising revenues grew for the first time since 2001.

“Time Warner once again delivered a very strong quarter, with a robust 10 percent revenue increase and an even better 17 percent increase in adjusted operating income before depreciation and amortization,” said Chairman and CEO Dick Parsons. “The foundation of our strategy continues to be running our businesses better than ever, with a focus on maintaining or extending their competitiveness.”

The AOL segment of the business saw operating income before depreciation and amortization (OIDA) climb 13 percent in the quarter on a 2 percent increase in revenue, largely due to improved advertising revenue, which climbed 23 percent to $42 million. This growth was led by $31 million in revenue from paid search.

“This is the first time since 2001 that we’ve seen a growth in ad revenue,” Parsons said. “We believe AOL is positioned to get its fair share of online advertising revenue.”

The results do not include the expected benefits from the pending acquisition of online marketing company Advertising.com, announced in June and expected to close this quarter. According to Parsons, the Advertising.com acquisition will not only provide tools for AOL to use for its own advertising, but it will give AOL a stronghold in the pay-for-performance space.

Advertising.com acts as a media arbitrageur, typically buying CPM inventory from Web sites, search engines, and email publishers and reselling that to its advertisers on a pay-for-performance basis. Along the way, it adds value with its proprietary AdLearn technology, which optimizes media buys based on results.

“We recognize that the advertising opportunity is great. We plan to go to the Web to advertise to non-AOL subscribers and generate casual traffic from other Time Inc. sites,” Parsons said.

The increase in AOL’s OIDA reflected a reduction of $147 million in consolidated network expenses and higher advertising revenues. This was offset partially by lower U.S. subscription revenue and increased non-network expenses, particularly marketing, despite an approximate $25 million adjustment to reduce excess marketing accruals established in prior periods.

“We’re particularly pleased that all of our business segments contributed to the company’s growth for the second consecutive quarter. This strong year-to-date performance across the board reinforces our confidence that we’ll achieve our 2004 financial objectives.”

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