AOL’s Plan Working

    May 3, 2007

AOL changed their strategy last year by shifting from a subscription-based service to offering most of their services and content for free. In doing so they focused their energies on advertising.

Once the largest Internet provider they now have 12 million subscribers, trailing Comcast who has 12. 1 million and AT&T who is the biggest provider with 12.9 million customers.

AOL’s first quarter earnings revealed that there advertising revenue increased 35 percent because of solid sales of advertising on partner sites as well as display and paid search advertising.

Dick Parson, CEO of Time Warner said, "AOL continued to build momentum with its advertising-focused strategy, growing its advertising revenues 40% compared to last year’s first quarter."

"Clearly demonstrating the appeal of Time Warner Cable’s bundled offerings, net subscriber additions accelerated over the previous quarter in every major service category."

Parsons went on to say," We remain committed to delivering superior returns to our shareholders by driving execution, generating industry-leading operating and financial results, and allocating our capital effectively."

"In addition to targeting resources to key growth areas of our businesses, our $20 billion share repurchase program — which recently surpassed one billion shares of our common stock bought to date — continues to be an attractive investment at current price levels."

The news for AOL was not all good as their revenue dropped 35 percent to $1.5 billion partially due to a $665 million decrease in subscription revenue.

The decrease was something the company anticipated since they are offering services free of charge to broadband users.

During a conference call, Jeff Bewkes, Time Warner’s president said the company’s plan was working.

Their free email and other offerings have gained them eight million registered users since last summer.

He went on to say that AOL customers who drop their dial-up access and use the free services increase their time spent online by 50 percent.

He added that that challenge will be getting engagement out of their users.