Am I the only one keen on Time Warner's
Last week's earnings report from the media giant may have been uninspiring in sum. Earnings up 1%. Revenues down 3%. Yet if you looked specifically at AOL -- and beyond the continuing subscriber exodus -- you had to be impressed with the company's 45% spike in online ad revenues. Even if you back out the acquisition of Advertising.com, ad revenues were up by 20% despite the shrinking user base.
That, folks, is why I like Time Warner in general -- and AOL in particular. I mean, sure, we can point to the fact that paying subscribers are now down to 21.7 million. When usage peaked domestically in September 2002, AOL commanded an audience of 26.7 million. To think that AOL has lost a net of 5 million paying customers over the past 30 months -- a time in which the Internet's popularity has exploded in a good way -- well, it's just sad.
Always look on the bright side of strife
But again, that's why I like Time Warner these days. No bit of optimism goes unpunished. Look at the way the market is pricing the shares these days, with the stock valued at less than what either Time Warner or America Online were fetching individually before they were coupled together.
I may be the only one excited about the new and improved AOL.com. It seems everyone thinks of AOL.com as the place where AOL users go to check their email when they're on the road or where folks go to download AOL's Instant Messenger. Now that there are fewer subscribers checking their email and chatting, it would be all too easy to write off AOL.com to same gradual decline in usage as the flagship America Online service.
But that would be a big mistake. The new AOL.com began a soft rollout this past weekend, and the spiffier landing page is just the beginning. New services and features will help bring the Internet's prodigal surfers -- those who learned how to pedal online with America Online in the 1990s before tossing out the training wheels in favor of faster and more affordable connections -- back home to roost.
Don't call me Google
The new AOL.com is many things. None of them Google
Folks who have grown accustomed to Google's minimalist look may feel overwhelmed at first. AOL.com initially might not seem to offer much more than Microsoft's
From teaming up with XM Satellite Radio
If it can't have you as a paying customer, it will gladly take you back as a pair of eyeballs that it can profit from. In fact, beefing up AOL.com will probably mean a further decline in subscriber head count as more of the proprietary content gets pushed offline. But that's sort of the point. AOL is moving the party outside. Sure, it's gutting its once enclosed living room, but it's adding on a wraparound porch in its place.
Rule Breaker once more?
So that's why you shouldn't be surprised if Time Warner's online efforts produce greater profits in the coming years despite a lack of growth in subscriber revenue. That's not a bad thing. Yet if AOL loses some of its established, paying user base in the process, won't that be a golden opportunity for companies like Earthlink
It's been more than a decade since we first dubbed America Online a Rule Breaker, and, no, I am not suggesting that Time Warner is a nimble growth stock these days. However, there are some exciting things taking place there -- especially at AOL.com. Care to pay attention? That would be really, um, keen.
The headlines behind the AOL.com makeover:
- Last quarter's numbers were flat on the surface.
- AOL's got a long road back but it is willing to travel.
- Check out the growth stocks making the Rule Breakers cut these days.
Time Warner was recommended in our Motley Fool Stock Advisor newsletter back in 2002. Want to see what companies Tom and David Gardner like these days? Try it out for six months risk-free!
Longtime Fool contributor Rick Munarriz has been an AOL subscriber since 1992, but he doesn't own any of the stocks mentioned in this story. The Fool has a disclosure policy. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.