Advertising revenue at America Online during the third quarter of 2004 increased 44% over the same quarter last year to $257 million, AOL parent Time Warner revealed today in announcing its Q3 financial results.
But a 3% drop in AOL subscriber revenue undercut that advertising increase for the same quarter. That amounted to a decline of $52 million in subscription revenue on a loss of 2 million U.S. subscribers since Q3 2003. Overall quarterly revenue at AOL increased 1% from Q3 2003, and earnings rose 21%, mostly due to reduced network communications costs.
One large factor in the spike in AOL’s quarterly ad revenue was an additional $30 million in paid search revenue. That constituted a 70% hike over paid search fees in the previous quarter, and was attributed largely to the August 2003 acquisition of interactive ad firm Advertising.com
In a conference call with analysts, Time Warner chairman and CEO Dick Parsons said that Internet ads will be a “robust part of AOL’s story going forward.” But he also insisted that AOL subscriber sales would remain profitable and suggested that the company needed to change its popular image as primarily a big provider of dial-up Internet service.
Don Logan, chairman of Time Warner’s Media and Communications Group, said during the call that the company plans to expand the AOL audience beyond the declining dial-up subscriber base in order to increase the value of ads on the network. Next year, for example, the AOL.com Web site will be opened to non-member viewers, Logan said.
Time Warner also announced that it was setting aside a legal reserve of $500 million to allow for settlement of bookkeeping issues raised by the Securities and Exchange Commission relating to its buyout of outsider stakes in AOL Europe in 2000.
Time Warner’s own earnings fell 8% in Q3 2004 to $499 million from $541 million during the same quarter last year. But quarterly revenues at the AOL parent, which also owns cable networks, the WB network, book and magazine publishers and two Hollywood studios, were almost $10 billion — a 5% increase from $9.5 billion a year ago.
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