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American Online ad revenues to fall by 50% next year

NEW YORK - America Online says that advertising revenue could be down by as much as 50% next year, adding to its woes in a period that has already seen it uncover $200m of falsely booked advertising deals.

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Parent company AOL Time Warner said that it expects advertising and commerce revenues to be between $1.5bn (£960m) and $1.6bn for 2003, blaming the fall on lower revenues from prior period commitments.

AOL said that subscription revenue would deliver "solid growth" offsetting advertising and commerce declines. Earnings before interest, taxation, depreciation and amortisation could be down overall by between 15% and 25%.

The company has faced investigation over the way that advertising revenues have been booked at the online service. In October, AOL Time Warner said it had uncovered $200m of advertising deals falsely booked as income as a result of "inappropriate" accounting. At the same time, it revealed that advertising revenue at AOL was down by 48%

In a statement today, Wayne Pace, chief financial officer at AOL Time Warner, said: "Our 2002 results continue to track as we expected. Even though it's early to give a precise 2003 outlook for America Online, management has just concluded a comprehensive review of its operations and has developed an achievable business plan to build a strong foundation for the future.

"It is clear that 2003 will be a transition year, but with this plan we expect America Online once again to deliver solid Ebitda growth beginning in 2004."

AOL Time Warner is describing today as AOL Day and the company is preparing to outline its strategy to turn around America Online. It is thought that the company will be reviewing its broadband strategy, introducing more paid-for services and reducing its reliance on advertising as it seeks to generate more revenues.

The strategy is due to be unveiled in New York in the next hour.

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