Google Brings 35% of AOL Ad Sales

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Time Warner reported this week that its America Online unit benefited from strong growth in paid search through its Google partnership.

The company said search revenue grew $27 million in the quarter, nearly balancing the $31 million decline in ad revenue from other Time Warner businesses. Overall, AOL's ad sales were $214 million, down 5 percent from the same period a year earlier.

AOL in the quarter took in $74 million thanks to its agreement to display Google's paid listings, a 57 percent increase from a year earlier.

Like many portals, AOL increasingly depends on paid search, which now accounts for 35 percent of ad revenue. Merrill Lynch estimated search was just 5 percent of AOL's ad sales in 2002. AOL began showing Google's paid search ads in May 2002.

Another Google search partner, Ask Jeeves, reported this quarter that Google listings brought in $27 million last quarter, or 69 percent of sales. Google and its distribution partners share the revenue generated from clicks on the search listings.

AOL continued to shed customers, losing 237,000 to finish the quarter with 24 million. AOL's dial-up base has defected to lower-cost options or faster broadband connections.

Overall, AOL reported flat revenue and income growth. Sales were $2.2 billion, essentially unchanged from a year earlier. Operating income rose from $194 million to $277 million. AOL's merchandise sales increased 21 percent, or $15 million, and its subscription revenue rose 1 percent, or $21 million. The unit also generated cost savings in the quarter.

Time Warner reported a strong quarter, with $961 million of net income on $10.1 billion of revenue.

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