AOL’s Ad Revenue Plummets

AOL’s advertising business is in a free fall. The beleaguered company’s ad revenue plummeted by 29 percent during the fourth quarter of 2010, landing at $331.6 million, according to an earnings report released on Wednesday (Feb. 2).

The slump was widespread, as AOL’s display, search and ad network businesses exhibited hefty revenue declines during Q4. Search revenue slid by 34 percent to less than $100 million. Meanwhile, ad revenue on AOL’s own sites dropped by 23 percent to $247.5 million, and AOL’s third-party ad network business—including—dropped a whopping 43 percent, netting out at $84.1 million.

The story was relatively better for the company’s core display ad business. Globally, AOL’s display advertising slipped by 14 percent in Q4 to $151.1 million. Display dollars in the U.S. dropped by just 8 percent to $139.6 million. The decline, however, is strikingly poor in light of the robust online advertising market. According to eMarketer, overall display advertising in the U.S. surged by 13.9 percent in 2010 and should see similar growth this year.

While AOL did exceed low Wall Street expectations in some cases in Q4, its weak display advertising numbers put extreme heat on CEO Tim Armstrong and his ad chief Jeff Levick, AOL’s president of global advertising and strategy. The pair has spoken openly about AOL becoming the dominant display ad company in the business while also emerging as the leading, if not top, publisher of Web content.