Shares in AOL Time Warner fell 14% yesterday following a downbeat forecast on the prospects for its America Online division.
The world’s largest media company believes that things will get worse before they get better and is predicting that advertising and commerce sales at its internet arm will fall by up to 50% in 2003. Full-year revenues of between $8.8 billion and $9.0 billion are already anticipated for this year.
A number of long term ad contracts signed at the height of the dotcom boom are due to expire next year and AOL is struggling to attract new business. Online advertising has been hit particularly hard by the overall downturn in sales but a new forecast from eMarketer holds out hope for the sector and is predicting 5% growth in the next twelve months (see Forecasts).
The revenues warning overshadowed the launch of AOL’s new strategy to reverse the fortunes of its internet operation. America Online chief executive, Jonathan Miller stressed that the division will now concentrate on offering quality services and content to existing subscribers and step up efforts to promote its broadband product.
“AOL has suffered from the perception of being long on ambition but short on accountability and sometimes follow-through,” said Miller. “That ends now.”
