NEW YORK Time Warner's America Online unit said its advertising sales rose 28 percent to top $1 billion in 2004.
AOL said its sales for 2004 were mostly flat at $8.7 billion, since the increase in online ad sales was offset by a $370 million decline in U.S. subscription revenues. AOL continues to shed subscribers, losing 464,000 in the fourth quarter and 2 million during the year to end with 22.2 million U.S. subscribers. Operating income for the AOL unit increased 41 percent to $934 million compared to a year earlier, helped by stronger ad sales and lower network costs.
AOL's relationship with Google helped power its online ad rebound. The company said U.S. paid search sales rose 51 percent in 2004 to $302 million, making it 29 percent of AOL's ad sales. The increased search revenues accounted for 46 percent of AOL's ad sales increase in 2004. Advertising.com, the direct response ad network acquired by AOL in August 2004, contributed $97 million.
The robust year-over-year growth reflects the strong demand for Internet advertising, as well as AOL's efforts to recast its sales strategy to make its Web sites more attractive to advertisers. AOL's sales representatives now sell target audiences across all AOL and Time Warner Web sites, rather than pushing specific content areas of the AOL service.
AOL ended 2004 strongly. In the fourth quarter, ad sales were $313 million, a 53 percent increase from the same period a year earlier.
AOL has begun to recast itself to focus more on advertising than subscriptions. In the first half of the year, it plans to launch an Internet portal for non-subscribers. AOL hopes to open up more ad inventory. The portal will also carry AOL's newly redesigned search engine, which uses Google's Web search and paid listings.
AOL also inked a deal with sister company Time Warner Cable to offer co-branded Internet service that AOL hopes can help move its dial-up users to broadband connections. High-speed Internet users are more attractive to advertisers, since they tend to spend more time online and can view new high-priced ad formats like online video.