For at least six years now, most of Wall Street and the media world have known that AOL is a sinking ship, destined to go under from the weight of its dial-up heritage and corporate parent woes. What's always been a mystery is why Time Warner couldn't see what the smart money saw.
The media giant issued its Q2 08 earnings results this morning showing, once again, that AOL isn't getting any healthier despite billions of dollars in accquisitions (Advertising.com, Bebo and others) all centered on propping up the perpetually failing online unit. During the quarter, AOL continued to lose access subscribers, although as CEO Jeff Bewkes pointed out during the company's earnings call, the 604,000 net subscribers lost is the lowest loss level since AOL jettisoned its subscriber model.
AOL's subscriber loss was expected, but the online unit continued to post deteriorating ad revenues amidst an online ad boom and despite the elaborate efforts by Time Warner management to create a one-stop ad shop in its complex Platform A initiative. During the quarter, AOL generated $430 million in ad revenue, a quarter-to-quarter decline of 11%.
The biggest loss was in display advertising, which dropped 19% during the quarter. Bewkes tried to put a positive spin on the fact that page views were up, suggesting that there's still hope for AOL yet. There continue to be "positive signs about the growth of the business" he said, pointing to the 19% sequential growth in page views to 55.6 billion.
Virtually nothing else about AOL was positive. Cash flow dropped 25% year-over-year to $350 million while operating income tumbled 74% to $230 million.
It's no surprise, then, that Bewkes hinted that AOL itself, as opposed to just its access business, may be on the sales block. Announcing that there would be three separate units inside Time Warner to deal with AOL -- one for the access businesses, one for the "audience" businesses and one to support both of those units -- Bewkes said "we have the opportunity to do something strategic [ed. note: strategic=sales] with either of these businesses today."
Cynthia Brumfield at 12:39 PM|Comments(0)
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