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AOL Time Warner seeks distance from Yahoo fallout

The Net media heavyweight touts its difference from online compatriot Yahoo with word of expanded ad deals, rising subscriber rates and a strengthening financial picture.

    NEW YORK--AOL Time Warner on Thursday sought to distance itself from its sagging online compatriot Yahoo with word of expanded advertising deals, rising subscriber rates and a strengthening financial picture.

    Speaking at the Merrill Lynch Internet conference in New York, AOL Time Warner's co-chief operating officer Robert Pittman said that financial results for the second half of 2001 are set to improve because the company believes that there will be flight to quality and that advertisers will choose to go with AOL Time Warner.

    "AOL has all the assets you can ask for and the best management," he said. "We have to manage around expectations and surprises."

    Separately on Thursday, the company said that it has expanded several key advertising deals and that the membership base for its America Online service has surpassed 28 million.

    The moves come at a pivotal time, as the slowing market for online advertising has most Internet companies scrambling to bolster ad revenue.

    Internet bellwether Yahoo on Wednesday shocked Wall Street with news that its first-quarter revenue will fall short of expectations and that Chief Executive Tim Koogle is stepping aside.

    Yahoo blamed the revenue shortfall on the weakening economy and cutbacks in marketing spending among its customers. In addition, the company said that the transition of its ad revenue base--from a reliance on pure Internet companies to a stream that includes more traditional businesses--was not as quick as it had hoped.

    Pittman said that AOL Time Warner has an advantage if advertising spending were to slow further. The company can advertise its own products and services across several of its own properties, including print, the Internet, television and radio outlets, which would act to lighten the company's own vast cross-media advertising, he said.

    Pittman also said he is happy where he is and has no interest in Yahoo?s chief executive post.

    Expanded ad deals
    The New York-based company made a point of its advertising health Thursday by announcing that it has strengthened its marketing and advertising pacts with traditional businesses Kinko's, Continental Airlines and P&O Princess Cruises. The partners are working with AOL Time Warner to promote their products and services through a slew of print and television outlets including AOL, CompuServe, Netscape.com, AOL Digital City and CNN.

    Several analysts pointed to the timing of AOL Time Warner's release as a reaction to Yahoo's most recent earnings warning, in a move to differentiate itself from Internet players caught in the downdraft of the online advertising market.

    Jeff Cino, an analyst at Jefferies & Co., said the expanded ad alliances indicate that the company is not in the same boat as its rivals.

    "This is proof that AOL is in fact distanced from competitors, from Yahoo," said Cino. "These announcements today serve as evidence that this is true."

    Under AOL Time Warner's new agreement with Kinko's, the two companies intend to create joint marketing initiatives aimed at driving brand awareness and sales. Kinko's said it is expanding the ads of its products and services across AOL's Net properties and Time Warner's media brands. AOL Time Warner will continue to be promoted in Kinko's stores and on its Web site.

    Continental Airlines, which currently gets promoted via AOL's travel site, has broadened its alliance to include promotions through the company's other Internet properties and wireless initiatives and through travel-related inserts in Time Inc.'s On Magazine. Princess Cruises plans to launch a new ad campaign across CNN TV properties and promote its services via several AOL travel brands. The ad campaign is slated to launch on CNN and CNN Headline News this spring.

    Separately, AOL, AOL Time Warner's Internet subsidiary, said that worldwide membership of its flagship service topped 28 million. The company also said that AOL members using the service are averaging nearly 70 minutes a day on the Web, an increase from 63 minutes a year ago.

    The company cited the success of the latest version of its Net service, AOL 6.0, as well as recent investments to improve network and customer support as primary drivers for new members.

    Staff writer Larry Dignan contributed to this report.