AOL advertising revenue falls even as rivals gain

The $33 million decline compared with the year-ago period, disclosed as parent company Time Warner Inc. released its earnings report Wednesday, marked AOL's first drop since it began distancing itself in late 2004 from its roots as an Internet access provider. Ad revenue grew 41 percent in 2006 and 18 percent in 2007 and was flat the first half of 2008.

Google Inc. earlier reported a 28 percent third-quarter gain in online advertising revenue, while Microsoft Corp. saw a 15 percent jump. Even the struggling Yahoo Inc. had a small increase of 1.2 percent.

During a conference call, Time Warner executives said the $33 million decline reflected the loss of an exclusive partnership with Apollo Group Inc., which owns the for-profit University of Phoenix. Revenue from Apollo alone was down $55 million, offset by $29 million in gains from acquisitions.

The company also blamed general declines in online display advertising, something much of the industry has seen because of the economy.

Time Warner had expected to begin seeing benefits in the third quarter from new technologies and a reorganization earlier this year to address missteps integrating $1 billion worth of corporate acquisitions into a single "Platform-A."

Analysts say it was too early to assess whether integration has succeeded.

Chuck Richard, an analyst with Outsell Inc., said the Apollo loss "masks any ability to make a strong judgment about ongoing stability or growth trends."

Dave Hallerman, senior analyst at eMarketer, said Time Warner executives "blamed Apollo in the last report and the one before that as well. Maybe it's true, but it's a theme."

Company officials suggested the Apollo loss will weigh down revenue in the fourth quarter and, to a lesser degree, the first quarter of next year as well.