You've got a new future
SAN FRANCISCO - AOL is shaking loose from Time Warner Inc. and heading into the next decade the way it began this one: as an independent company.
SAN FRANCISCO - AOL is shaking loose from Time Warner Inc. and heading into the next decade the way it began this one: as an independent company.
Unlike in the 1990s, though, when AOL got rich selling dial-up Internet access, it starts the 2010s as an underdog, trying to beef up its Web sites and grab more advertising revenue.
Despite a few bright spots in its portfolio of sites, such as tech blog Engadget, AOL has a long way to go until Web advertising can replace the revenue AOL still gets from selling dial-up Internet access. One especially popular property, entertainment site TMZ, is a joint venture with a Time Warner unit that will keep TMZ and its revenue after AOL splits off. Now investors are getting a chance to place bets on AOL. On Wednesday, Time Warner shareholders as of Nov. 27 will get one share of AOL for every 11 of their Time Warner shares. The next morning, AOL's chief executive, Tim Armstrong, is to ring the opening bell at the New York Stock Exchange, and AOL will begin trading under the ticker symbol of the same name - the one it had when it was known as America Online and used $147 billion worth of its inflated stock to buy Time Warner in 2001.
The parent company was even known as AOL Time Warner in the heyday. At the time, Time Warner thought its movie, TV and magazine content would benefit from ties with AOL's Internet access business. The media conglomerate announced AOL's spinoff in May after years of trying unsuccessfully to integrate the two companies.
AOL will initially be worth about $2.5 billion, based on the value of preliminary AOL shares that have been trading ahead of the formal spinoff this week. AOL will have no debt.
In those years, AOL struggled to complete its transition away from relying on its dial-up business. The service peaked in 2002 with 26.7 million subscribers, and has declined steadily as consumers have switched to broadband. In the third quarter, AOL had 5.4 million dial-up subscribers, who paid an average of $18.54 per month.
Even with the decline, this business brought in $332 million during the quarter, or 43 percent of AOL's total revenue. But that's down from $1.8 billion, or 82 percent of revenue, during its peak quarter seven years earlier.
Overall third-quarter revenue dropped 23 percent from last year to $777 million.
AOL has tried to offset the fading service by moving away from its origins as a "walled garden" with subscriber-only content to a network of online destinations with free material, supported by ads. AOL even began giving away AOL.com e-mail accounts.