AOL move to N.Y. seen as last chance to convince investors
Ad unit's future hangs in balance
NEW YORK - AOL's move to New York this month may signal the last chance for Time Warner Inc.'s Internet division to convince investors it has a future in advertising.
"It's important that they drive improvement in this business fast," said Jordan Posner of Matrix Asset Advisors in New York, which owns about 3 million Time Warner shares among $1.6 billion in assets. "Otherwise they'll wind up with a wasting asset."
The latest shift away from dial-up Internet subscriptions follows a series of failures since AOL bought Time Warner Inc. in 2001, and almost $1 billion in online ad acquisitions in the past 18 months. AOL websites lag behind Yahoo Inc., Google Inc., and Microsoft Corp. in US visitors, and blogs buzz regularly with rumors of job cuts.
Fourth-quarter ad sales rose 10 percent to $620 million at AOL, while industrywide sales jumped twice that, according to the Interactive Advertising Bureau. Moving to offices in Manhattan's Astor Place from Dulles, Va., is a bet by Time Warner chief executive Jeffrey Bewkes that a change of scenery may revive AOL and appeal to Madison Avenue ad agencies.
"AOL is a drain on management," said Michael Morris, an analyst with UBS AG in New York. "I don't think the direction that they're going with AOL right now is ultimately going to drive growth above the average."
Ad sales at AOL will probably rise 7 percent this year, versus 20 percent for US online advertising generally, said Morris, who recommends buying Time Warner, the world's largest media company, on the strength of its film and TV studios.
"I know we have work to do," Ron Grant, AOL's chief operating officer, said last week. "This is a turnaround. We're really well-positioned to capitalize on a great market in advertising."
Advertising.com is crucial to that growth. The online network, which buys and sells ads for websites, generated 29 percent of AOL's $2.23 billion in ad sales last year. In February, it helped AOL's ad business touch 90 percent of the 185 million US Internet users, according to Reston, Va.-based researcher ComScore Inc.
