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International: Time Warner sees AOL's future as an ad server

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International: Time Warner sees AOL's future as an ad server

Time Warner President-Chief Operating Officer Jeff Bewkes today gave a glimpse of how AOL might look under incoming CEO Randy Falco. Speaking at the annual UBS media conference, Bewkes said that Falco would prioritise communications, such as improving e-mail, a greater emphasis on video and social networking, and the possibility of a big acquisition to bolster traffic to the portal.

Bewkes talked up AOL to the financial crowd, saying that unlike its rivals, the web giant was in a much better place to monetise potential new traffic because its owns third-party ad network, which he said delivered much of AOL's ad revenue. He also noted that placed ads on rivals MySpace and Yahoo, but demurred when asked how much it delivers to those portals.

When asked about what Falco would do differently than his predecessor, Jonathan Miller, Bewkes responded, "Essentially, you've seen a little bit of it at Yahoo today. We really want to keep organising AOL towards the customer experience and the products offered by AOL. To give an example, e-mail is more than half the page views of both Yahoo and AOL. We'll be organizing more precisely around e-mail and video and picture sharing."

He also noted that AOL was eager to regain its leadership position in providing a community for its users. "AOL used to lead in (community) and we gave it up to some others we all could name. We want to go back. We've got 115 million unique users so there's no reason we shouldn't be a leader," he added.

Highlighting search

Bewkes further said that AOL's search capabilities, along with its search deal with Google, would be an area that would be highlighted under the new regime.

When asked if AOL would build traffic or buy it, Bewkes responded, "It will be both. A good precondition if you buy traffic is to have a monetisation cap that you plug in. You get an advantage that others can't. I wouldn't say we wouldn't buy traffic, but we could and we're in a good position to do it. We're able and interested in any reasonable acquisition."

AOL, which switched in August to an advertising business model from a subscription model, will end the year without the usual dip in users it has seen in recent years. As broadband and DSL became widely available, customers began dropping dial-up services such as AOL. Bewkes said that the company had historically been "disincentivizing" both its distributors – the cable operators – and users with charges.

Future ownership

He also said that Time Warner would have a much clearer idea of AOL's future ownership structure by mid-2007. "We would do whatever financing correctly for its risk or access to capital or getting the valuation right that it ought to have. Whether it's partially spun off or sold into private equity's hands, we'd always do that. The key constraint has to be long term."

Bewkes did talk briefly about the magazine business, highlighting People and its widely trafficked website, which he said was the No. 1 entertainment destination on the web. When asked if Time Warner would sell any more magazines than already planned, Bewkes responded, "Not now."



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