Time Warner Pessimistic About AOL's Ad Potential

AOL launched a new homepage replete with flashy advertising opportunities this week, but the redesign may still not be enough to turn the flagging unit around.

Speaking at a Merrill Lynch & Co. investor conference in Marina del Rey yesterday, Time Warner's Chief Financial Officer John Martin expressed concerns about the company's advertising:

"It had been growing like a weed. We have seen some cancellations. It gives us pause in terms of our confidence to ramp advertising in the back half of the year."

While advertising on the web grew 20 percent in the second quarter of this year, AOL's advertising has stalled, with 1.5 percent growth in the second quarter following four quarters of decline. The company has since seen some ad-contract cancellations and has run into trouble integrating some of its almost $2 billion in acquisitions in the past two years.

The redesign is part of the company's effort to turn their sluggish numbers around, but will it be enough?

The new AOL.com has dropped the walled garden approach that had become an AOL trademark in efforts to adapt to how viewers use the Internet today. The site now serves as an entry point for Internet users accustomed to surfing the web unimpeded, with links to third party sites like Gmail, Yahoo, MySpace, and Facebook.

In efforts to fix their monetization problems, the new AOL.com will display advertising units that marketers generally find more desirable. The new site features a photo gallery and video player with interactive ad spots, a new ad space on the home page that is double the size offered on most other portals, and integrated links and modules that can be skinned with advertising sponsorships.

AOL is the fourth-largest Web site in the U.S., with 111.4 million unique U.S. visitors in July, according to comScore Media Metrix. But that is still a decline from the 113.9 million people that visited the site during July last year.

Long gone are the days when AOL got first billing in its partnership with Time Warner. The Wall Street reports that Time Warner continues to actively consider unloading the property:

Mr. Martin said Time Warner continues to "evaluate whether there's something that could be done with AOL." Advertising at Time Warner's cable networks, the most exposed of its units to advertising, remains "very strong," he said. "We're not yet feeling any negative impacts from the economy," he said.

by Meghan Keane for Wired.com