Earnings Call: Bewkes Says AOL Traffic Up, But Ad Revenue Down In A Big Way

This story was written by Rory Maher.
Time Warner's earnings call this morning added some new detail about the company's results, including important information on its digital operations. Here are some of the takeaways:

Traffic growth remains a bright spot for AOL (NYSE: TWX)publishing page views were up 69 percent in the fourth quarterbut CEO Jeff Bewkes said display advertising was down 25 percent in the fourth quarter and CFO John Martin's prediction of a 20 percent decline in total advertising at AOL in the first quarter of this year implies a 35 percent to 45 percent falloff in display advertising; that figure is in line with what IAC (NSDQ: IACI) is projecting. It's pretty clear that the weakening in display cuts across the industry and isn't confined to a few companies.

Search advertising at AOL was flat in the fourth quarter and is holding up fairly well in the current quarter relative to display, thanks to only modest declines in cost-per-click rates, according to Martin (again, that's in line with the industry). Third-party network advertising declined 13 percent in the fourth quarter (accounting for publishers that AOL dropped from the network), which indicates the networks likely were able to produce better results than display did, by aggressively cutting rates. This could continue to be a problem for display advertising in 2009 since network rates are typically lower than display rates, and networks have historically been more flexible than individual publishers in pricing inventory at fire-sale rates when they need to.  As a result, if advertisers spend on display in the near-term, the cheaper network inventory will likely benefit first

Other highlights:   

Bewkes' statement that the company plans to release a significant number of new titles from its interactive games unit is further evidence that the gaming industry is weathering the economy fairly well.

27 million people watched the presidential inauguration live online at CNN.com, an impressive figure that shows the growing appetite for live and on-demand video. Bewkes said the company would increase the resources it allocates to news coverage on mobile and broadband.

Bewkes said the company would launch 30 targeted sites in 2009. This is a good move, as marketers will demand more targeting in the current downturn; even when the ad economy recovers, marketers will likely do more large targeted buys, an option that most mass-market online publishers have struggled to provide. AOL appears to be moving in the right direction in this respect.

Bewkes: "We don't plan to sell Bebo."

Nothing new on any AOL/Yahoo/Microsoft (NSDQ: MSFT) developments; Bewkes, as he has in the past, said the company continues to explore all options.


By Rory Maher