AOL Time Warner expects its online ad sales to plunge

AOL Time Warner Inc said advertising sales at America Online, the biggest Internet service, will plunge by as much as half next year, leading to a drop of at least 15 percent in the unit's profit before some costs.

AOL Time Warner shares fell 14 percent, their steepest decline since July. America Online said revenue next year would be unchanged as money from subscriptions won't compensate for declines in advertising. The forecast came as executives including CEO Richard Parsons met yesterday in New York to outline a plan for reviving the business.

America Online is asking investors for patience as it offers more content and seeks more high-speed Internet customers, saying next year would be a transition period. The decline in shares is evidence investors are growing more skeptical that AOL Time Warner's merger last year, touted as a marriage of a high-growth Web company and old-fashioned media, will bring promised profits.

"I am not hearing any substantive strategies to re-energize the division," said Doug Kass, a hedge fund manager at Seabreeze Partners LP, which sold shares of AOL Time Warner in the past few months. He declined to say how many.

Parsons has said America Online will try to generate more money from existing subscribers and retail partners. The service will offer free content from AOL Time Warner magazines such as People and InStyle. Members will receive access to CNN's pay video news services over high-speed Internet.

Parsons has charged America Online CEO Jonathan Miller and Don Logan, head of the company's media and communications group, with restoring investor confidence at the unit, which also is contending with US investigations into its accounting.

"This is a business that in the fullness of time will become the growth driver" for AOL Time Warner, Parsons told investors.