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AOL May Lose Revenue in Coming Years, CEO Admits

6:00 am on October 31, 2006 | Category: Business, Internet, Telecom Services, Web Services

AOL Chief Executive, Jonathan Miller admitted in a recent interview that his companyâ€™s revenues will likely shrink over the next couple of years as it transitions from Internet Service Provider to pure-play online media company.

“Maybe another two years, you are right there,” Miller said when questioned by German newspaper, Die Welt. “But it’s about profitability for us in this phase.”

“In the past, we invested a lot of money in the infrastructure for the access business and in winning customers. That’s over now. Later, sales should rise again,” Miller confirmed.

He explained that the companyâ€™s profit margin was between 20% and 25% on sales of dialup subscriptions, but that AOLâ€™s online advertising business often runs margins of more than 50%. Revenues from this business jumped 40% in the second quarter to $449 million, but couldnâ€™t quite cancel out a 2% drop in AOLâ€™s overall sales.

The internet giant has recently sold its dialup businesses in France, Germany, and the UK, as it gradually transforms into a free web portal, where email and entertainment services are paid for by advertising.

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