To help it better weather the downturn in advertising, AOL Time Warner Inc. has stepped up intercompany advertising spending.
In a recent filing with the Securities and Exchange Commission, AOL Time Warner acknowledged it has increased intercompany advertising spending from $1 million during last year's third quarter to $97 million this third quarter on a pro forma basis. During the first nine months of the year, the company spent $252 million on intercompany advertising, up from $12 million in the same period a year ago.
AOL Time Warner also said that each transaction is recorded by its business units as if they were third-party transactions and do not impact the company's consolidated revenue. It does, however, reduce the company's consolidated advertising expense, since the money is being spent inhouse.
Third quarter revenue increased to $9.3 billion in 2001, up from $8.7 billion on a pro forma basis in 2000, the company said. This increase was driven by a 13 percent increase in subscription revenue to $4.2 billion and a 6 percent increase in content and other revenue to $3.2 billion. However, that was partially offset by a 5 percent decrease in advertising and commerce revenue to $1.9 billion.
The company also said that in the third quarter, America Online's advertising and commerce revenues rose 5 percent to $624 million. That revenue was driven by a 7 percent increase in advertising that included contract settlements and intercompany revenues.
