Ad Revenue Down at AOL as Time Warner Reports Q3

What a drag for AOL. Despite its many acquisitions in the ad network space, its aggressive platform strategy, and its rebranded ad sales division, the Time Warner unit reported ad spending fell 6 percent during the quarter ended October 30.

The earnings tidbit adds to mounting evidence suggesting demand for display advertising is slowing, and gives fodder to those arguing digital marketing is headed for a recession.

“Driving the decrease in advertising revenues were declines in display advertising on AOL Network sites and sales of advertising on third-party Internet sites, offset partially by an increase in paid-search advertising,” the company said in its earnings statement.

AOL’s display ad ambitions have appeared threatened for some time, going back as far as Q2 2007, when annual ad revenue growth slowed sequentially from 40 percent in Q1 to just 16 percent in Q2. The slide has continued — ad revenue grew only 2 percent last quarter — and the Q3 collapse into negative growth only continues that trend.

AOL’s overall revenues were down 17 percent to $398 million, driven mainly by a 26 percent fall-off in subscription revenues. The unit is still profitable however. Operating income rose to $268 million, a slight decrease compared to Q3 2007.

Time Warner’s overall net income was down slightly to $1.1 billion on revenues of $11.7 billion.