IP Democracy: AOL Continues to Shrink: Ad Revenues Drop Sequentially

Despite hype generated by the release of Comscore data last week showing increased traffic to AOL sites, the troubled Time Warner unit continued to shrink away during Q1 08, according to trending schedules (PDF) released by Time Warner this morning in conjunction with its Q1 08 earnings results. Revenue for AOL was down 23% year-over-year and 10% sequentially to $1.1 billion. (Download our spreadsheet that contains key financial and operational data for AOL for Q1 06 to Q1 08.)

AOL continued to lose its dial-up customer base, losing 647,000 subscribers to end the quarter with 8.7 million customers. (Just two short years ago, AOL had nearly 19 million subscribers and three years ago, this number neared thirty million.)

Even with a big boost in reported traffic (affirming the comScore numbers), ad revenues for AOL were flat year-over-year and declined sequentially. Total ad revenue was $552 million, up only 1% year-over-year but down 11% year-over-year.

At the same time, however, page views rose 19% year-over-year and 7% sequentially to 52.5 million even as unique visitors stayed stable at 110 million (down from 111 million in Q1 07 but up from 109 million in Q4 07). The number of monthly page views per unique visitor rose by 20% year-over-year to 159.

So, with page views on the upswing, what happened to ad revenue? Obviously AOL cut its ad rates or failed to sell as much inventory at desired prices as it had hoped or both. Domestic ad revenue less traffic acquisition costs on a CPM basis dropped 29% year-over-year and 27% sequentially to $5.56.

Time Warner will hold its earnings call at 10:30 a.m. ET and we'll get more insight into AOL's disappearing act.

Posted by Cynthia Brumfield on April 30, 2008 9:12 AM to IP Democracy