AOL Turnaround Toast? Parsons/Falco Disagree About Slowdown


AOL is trying to contain the damage Time Warner CEO Richard Parsons’ recent comments did to the turnaround story.  On the Q2 call, Parsons reported AOL’s startlingly disappointing 16% advertising growth and said the company no longer expects AOL to grow faster than the online ad industry as a whole.  This contradicted President Jeff Bewkes’s comments from the end of May saying that AOL would grow faster than the industry.  And now AOL CEO Randy Falco has expressed full confidence in the unit (NY Times), suggesting that Parsons was hallucinating again.

If AOL wants to restore the market’s confidence, Time Warner’s execs need to get their stories straight.  Dick Parsons attributed some of the slowdown at AOL to the anniversary of the Google search deal.  Randy Falco apparently cited redesigns of several AOL channels and changes in the way the company displays search results.  Neither explanation is encouraging, but they might be more so if the executives agreed.

One thing that everyone agrees about is that’s growth is now faster than AOL’s.  This is presented as good news, but it isn’t.  Third-party ad sales groups can generate tons of revenue, but they generally have lower margins than the media properties they serve (for example, Google Network vs. Google Sites).  That AOL had the foresight to buy is good news.  That will increasingly represent a greater percentage of AOL’s overall revenue isn’t.

See Also:
analysing AOL: How Bad Was Q2?  What’s It Worth?
AOL: A Mistake to Go Free?