Analyst: AOL Ad Revenues Down 18% (TWX)

Analyst Imran Khan says that when Time Warner (TWX) revised its 2008 revenue guidance down $370 million this morning, it implied an 18% year-over-year decline in AOL’s advertising revenues — about $64 million.

Khan’s maths:

We estimate that advertising revenue shortfall at AOL is at least $64 million, implying an 18.4% Y/Y advertising revenue decline. We make the following assumptions to arrive at this estimate: (1) we assume that half of the 1% shortfall in Y/Y Adjusted OIBDA growth that TWX press release attributes to both, Publishing and AOL is due to online ad revenue shortfall; and (2) we assume a 100% incremental margin.

Khan says the drop reflects budgets shifting from display to search in the weakening economy. That would make this bad news for AOL good news for Google (GOOG).  But we’ll believe that when we see it.

Either way, it’s an awful number considering so much of AOL’s vaunted Platform A’s business is direct response advertising, which, like search, is also supposed to thrive at a time when marketers are demanding stricter ROI.

See Also:
Time Warner Slashes 2008 Guidance On Ad Collapse (TWX)


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