"AOL Revenue Could Be Down 30% in Q1" -- David Faber

Henry Blodget | April 16, 2008 9:59 AM

davidfaber.jpgCNBC's David Faber relays rumors this morning (3 minutes ago) that Time Warner's AOL's ad revenue is "falling off a cliff." We've heard rumblings about a weak quarter at AOL--down year-over-year versus the company's "flat" guidance--but nothing approaching a 30% drop.

We don't think it's likely that an AOL-Yahoo deal will come to fruition, but if AOL's revenue is really down 30%, we are going to be hastily revising our opinion that $10 billion for AOL is a "fair" valuation.

See Also: Yahoos Hate AOL Deal, But Too Scared To Tell Jerry

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23 Comments

WOW said:
good feed Henry! This is just becoming more and more interesting.
eric said:
Are we in any way surprised?

Since Rondy took over, they have killed the high CPM targeted inventory, turned everything into a weak CPM network model, killed their search revenue, done nothing about the fact that they killed their search revenue, lost $200MM University of Phoenix contract, lost all their experienced top executives apart from Conroy, lost any good sales people they might have had, (which was few), have an inexperienced management team, under an even more inexperienced executive team. Henry, AOL was valued at $20BN and now, you would be lucky on $6BN. Oh and let's not forget that even after re-stating revenue targets they have missed every quarter since Rondy took over.

Wow doesn't Bewkes look smart?
Huh said:
I think the internal fear of missing the numbers at AOL, even modestly, translates into external rumors and ends up as over-the-top assumptions like this. I bet we'll see a couple of divisions up and a couple down and likely a dip overall. The hysteria that the doom and gloom merchants generate usually doesn't bear out.
jenkins said:
Totaly agree with the assessment of Huh.
knowsthedeal said:
The actual figure is closer to 24%. And that's a fact.
Henry Blodget said:
Wow. For AOL and Time Warner's sake, certainly hope not.
Huh said:
If you're an insider knowsthedeal, you're a naughty boy. Still think you're exaggerating. Maybe one group is down 24%, overall seems unlikely.
KnowsTheBusiness (URL) said:
It wouldn't surprise me if this was the case. Mortgage companies and the Financial companies are some of the largest advertisers and with the downturn in the economy, their is a huge shot that they pulled back.

Also with the economy hit, many there was an acceleration in the departure of the dial-up customers to save money.

I say larger than 20% but 30% could be plausible.
not-yet-ex-aol-employee said:
Maybe a major advertiser jumped ship from AOL in early 2008...

According the 2007 Annual report, in the "RISKS RELATING TO TIME WARNER’S AOL BUSINESS" section on page 21 [link below snippet]:

"Changes in AOL’s relationship with a major customer of Advertising.com will put downward pressure on
AOL’s advertising revenues in 2008. Approximately 17% of AOL’s growth in advertising revenues in 2007 was
attributable to a major customer of Advertising.com. As a result of an amendment to the contract with this customer,
beginning in 2008, this customer is under no obligation to continue to do business with Advertising.com, which is
expected to result in a substantial reduction in advertising revenues to be received from this customer. Accordingly,
if AOL does not secure new or expanded relationships with other customers in amounts sufficient to offset any loss
of revenues from the customer, it will not be able to maintain or increase advertising revenues."

http://files.shareholder.com/downloads/TWX/255182496x0x172551/CA55EB21-7F45-47BA-BE51-BFF899548A24/2007AR.pdf

not-yet-ex-aol-employee said:
Link seemed to have been truncated... trying again.

Maybe a major advertiser jumped ship from AOL in early 2008...

According the 2007 Annual report, in the "RISKS RELATING TO TIME WARNER’S AOL BUSINESS" section on page 21 [link below snippet]:

"Changes in AOL’s relationship with a major customer of Advertising.com will put downward pressure on
AOL’s advertising revenues in 2008. Approximately 17% of AOL’s growth in advertising revenues in 2007 was
attributable to a major customer of Advertising.com. As a result of an amendment to the contract with this customer,
beginning in 2008, this customer is under no obligation to continue to do business with Advertising.com, which is
expected to result in a substantial reduction in advertising revenues to be received from this customer. Accordingly,
if AOL does not secure new or expanded relationships with other customers in amounts sufficient to offset any loss
of revenues from the customer, it will not be able to maintain or increase advertising revenues."

http://files.shareholder.com/downloads/TWX/255182496x0x172551
/CA55EB21-7F45-47BA-BE51-BFF899548A24/2007AR.pdf

Henry Blodget said:
Yes, I think that was Apollo. But that was factored into the guidance of "flat"
eric said:
The major advertiser that jumped was University of Phoenix which cost AOL $200MM
disgusted said:
So what if the numbers might be exaggerated! It's probably safe to say they aren't going UP!

Someone PLEASE tell me ONE THING positive thing that Ron & Randy have done for AOL - or Time Warner shareholders for that matter.
crazy but... said:
What they have done is rippened Platform A for a spin off. Bought networks & technology, changed the name, struck a deal with google for search. The question is who will be willing to take on such assets and at what price. I guess we will see.
Nick Charles said:
The news about Platform A being the biggest ad network tells you that they are getting ready to take a big hit on the revenue side. It's kind of sad that what is pitched as the future of AOL gets compared to one line of business at Google.

But that's what it has come to. BTW, did GOOG report a big drop in revenue for the quarter because of the economy? No, I didn't think so.

The water is even with the decks now---but where is my breadfruit tree, godammit?

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steph (URL) said:
640-802 / 70-620 / 000-331 / MB2-632 / 642-061 / 642-811"AOL Revenue Could Be Down 30% in Q1" -- David Faber See? I told you! It's cold outside. I should have worn my jacket. See? I told you. It's a cold day. Don't pass up a golden opportunity.

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