AOL may have the widest-reaching advertising network in Platform A, but it is not seeing the financial rewards of that reach. In fact, Time Warner today announced that during the first quarter, AOL’s overall advertising revenues grew just 1 percent. Total revenues at AOL slid 23 percent because the access business continues to go away, but everybody knows that and the focus now is on whether AOL can reinvent itself as a pure Internet advertising company.
AOL spent about $1 billion over the past year on companies like Tacoda and Quigo to buy its ad network market share. Those businesses aren’t quite kicking in yet partly because of delays in integrating their sales forces But the bigger problem was that gains in third-party ads sold on other sites were almost completely offset last quarter by an 18 percent drop in display ads on AOL-owned properties. AOL makes a lot more margin on ads it sells on its own sites than on ads it sells on other sites. That is why it is trying to boost its own pageviews by upgrading its sites and is the reason why it bought Bebo for $850 million earlier this year. The more ad inventory AOL can sell on its own sites, the better its margins will be.
AOL’s deal with Google on paid search advertising, like IAC’s. is also helping to shore up its overall advertising sales. Although, it is not clear what the exact impact was because the company did not break out the numbers.