Yup, you've got albatross.

Time Warner's (NYSE: TWX) quarterly report this morning is a lot like the storyline behind the studio's I Am Legend flick. It's a long quest for signs of life in New York City, but the zombie cadavers are getting restless.

The numbers are uninspiring. Revenue inched just 2% higher to $11.4 billion. Earnings from continuing operations -- after backing out a series of charges that is almost as long and infected as Will Smith's flawed movie -- came in flat at $0.22 a share.

The culprit is easy to pick out in a lineup. It's a running man in front of a blue triangle. AOL dragged down reasonable upticks elsewhere. Revenue fell by 23% at Time Warner's online arm, but operating profits also took a sharp tumble.

That last point is surprising because what AOL was giving up in low-margin access revenue it was supposed to make up in high-margin online advertising. That is how the past few quarters have shaped up, but now AOL is hitting the wall on that front.

Ad revenue inched just 1% higher, and that's with the company going all out in smoking out acquisitions to offset its organic decline. Display advertising is tanking, and AOL warned that weakness there will continue in the current quarter.

That's bad news for everyone but Google (Nasdaq: GOOG), which is making a killing in text-based paid search marketing. AOL's lament isn't necessarily telltale of the industry as a whole, though you have to worry for companies like Yahoo! (Nasdaq: YHOO), Microsoft (Nasdaq: MSFT), and ValueClick (Nasdaq: VCLK) that are banking on display advertising's popularity to bring home the proverbial bacon.

AOL isn't a dud. It's serving up roughly 17.5 billion page views a month. However, traffic is meaningless without effective monetization. You see that in recent laggards like Yahoo! and CNET Networks (Nasdaq: CNET).

Beyond AOL, Time Warner is holding up just fine. It's not perfect. Golden Compass was a cinematic dud. I can't be the only one finding it hard to forgive the company for shuttering both its Business 2.0 and LIFE magazines. However, those knocks are so 2007. Time Warner is holding up well in 2008, sidestepping the Writers Guild strike with steady contributions from anything not named AOL.

The company is also looking to complete a total structural separation from its Time Warner Cable (NYSE: TWC) spinoff, whereas investors are probably hoping that it could nip AOL at the bone first, before it becomes more gangrenous.  

In the meantime, Time Warner is sticking to its earlier full-year guidance. The company is looking to earn between $1.07 a share and $1.11 a share from continuing operations. That's comforting. Time Warner's fate won't be the same as Will Smith's character in I Am Legend. However, the company needs to make sure that its New York City hub keeps the living dead at bay. It won't be easy. They move fast. They're hungry. And all it takes is one bite to infect you for good.

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Longtime Fool contributor Rick Munarriz tells people that he's the "you've got mail" guy for kicks. He does not own shares in any of the companies in this story. He is part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.