Please God, Just One More Bad Year

Say a prayer

Time to watch the ship start sinking; AOL can’t bail out much longer. Breaking news at the Washington Post quotes Rob Enderle, a principal analyst for the Enderle Group, saying that unless AOL becomes more competitive, “this property will be without value by this time next year.”

AOL had its worst quarter since changing its business model last summer to regain money lost from over 14 million fleeing subscribers. Giving away free access to AOL’s software and premium content while attaching ads to member’s inboxes and emails was supposed to staunch the painful flow of lost dollars. For a while the ad-based model seemed to have some hope. AOL claimed profits rose around 40% for each subsequent quarter, but profit rose just 16% last quarter, and past examination proves most of the increase was from, an AOL subsidiary that places ads on third-party websites, not on AOL’s.

AOL has seen a 59% decline in paid memberships from a supposed peak of 26.7 million in 2002, but AOL was sued for fraud years ago by the SEC for inflating subscription counts and ad revenue; rumor has it AOL memberships never topped 22-23 million at any point in time. Some statistics from the Post:

Overall revenue at AOL [has] dropped 38 percent, to $1.3 billion.

AOL accounts for 11 percent of Time Warner’s revenue, about half of the 20 percent it had contributed until last June.

In a conference call yesterday, Richard Parsons, Time Warner’s chairman and chief executive, said the company no longer expected AOL’s ad sales to meet or exceed the growth rate seen by the broader U.S. Internet industry.

AOL’s audience has been growing at a pace below Google, Yahoo and MSN.

Not to mention AOL is so difficult to cancel and so hard to uninstall that their reputation for thievery and gumming up people’s PCs precedes them.

Cynthia Brumfield of IP Democracy has all the latest stats on AOL’s page views, lack of profitability, and sliding ad sales. Check it out.

This downturn leaves AOL pinning it’s hope on Tacoda, a behavioral ad-targeting firm that tracks members as they surf the Web to push “relevant” ads. My gut feeling: AOL doesn’t stand a chance. Rumor has TW selling AOL long before a year from now; this news could make that rumor a reality.

This post’s title is an obvious take-off on FuckedGoogle’s (in)famous banner: “Please God, Just One More Bubble!”.