• Reuters, Monday, October 23, 2006 11:02 AM

Time Warner unit AOL's ad sales will likely shrink for the next two years as it gives away services to win more users and attract advertising, said CEO Jonathan Miller in an interview with German newspaper Die Welt. "But it's about profitability for us in this phase," he said, referring to restructuring measures recently implemented by the company that would shift its core business from subscription revenue to ad sales.

"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 said, adding that AOL made profits of 20% to 25% in its Internet access business, but more than 50% in its advertising business.

AOL recently sold its U.K., France and Germany subscription business, AOL Europe, for almost $2 billion in its effort to reinvent itself as a free, ad-supported Web portal. It sees Europe as a key growth area. Miller also added that an initial public offering for AOL could be an option following Time Warner's decision to take Time Warner Cable public. Instead of AOL itself being sold, Miller said the company was looking at the so-called "Web 2.0" market for a potential acquisition.

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