• The Associated Press/Silicon Alley Insider, Wednesday, November 5, 2008 11:02 AM

Time Warner on Wednesday beat Wall Street estimates with stronger than expected third quarter profits, but the news at its AOL Web portal wasn't quite so rosy. The media giant reported overall net income of $1.07 billion, or 30 cents a share, which was roughly in line with the $1.09 billion, or 29 cents per share, it recorded during the same period last year.

However, advertising revenue at AOL fell for the first time since the unit's 2004 conversion to a free, ad-supported Web portal. Revenues fell 6% after going flat for the first half of the year. The company had recorded ad revenue growth of 18% in 2007 and 41% in 2006. Time Warner blamed the declines on weak demand for online display advertising, something many other big Web publishers have cited in their third quarter earnings reports.

Silicon Alley Insider's Henry Blodget points out that AOL's declines would have been worse had it not been for the company's search partnership with Google. Also, growth in Platform A, AOL's advertising network, clearly did not offset declining demand for AOL's more profitable premium business. In fact, ad revenue per unique visitor fell 15% year over year. According to Blodget, "the fundamental problem here is that there really isn't an "AOL" anymore: The division is just a collection of quasi-related online assets such as AOL.com, AIM, MapQuest, TMZ, Weblogs, Platform A, and an ISP. If Time Warner can't sell the whole thing as a unit, it should probably begin to dismantle it and sell it piece by piece," he said.

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