America Online 2009 Annual Report Download - page 22

Table of Contents
spending in the foreseeable future. Because we derive a substantial portion of our revenues from the sale of advertising, declines and delays in advertising
spending could continue to reduce our revenues. Advertising spending by companies in certain sectors that have been significantly impacted by the downturn
in the economy represents a significant portion of our advertising revenues, and any economic or other changes resulting in a significant reduction in the
advertising spending of these or other sectors could further adversely affect our advertising revenues.
Additionally, declines in consumer spending due to weak economic conditions may cause advertisers to reduce their spending if consumers are
purchasing fewer of their products or services, ultimately resulting in downward pricing pressure on our advertising inventory. As a result, declines in
consumer spending could indirectly adversely affect our advertising revenues.
While we do not believe that our subscription access service has been adversely affected by the recession, there is a risk that existing subscribers may
elect to cancel their subscriptions as a result of the weaker economic climate. Should this occur, we may experience an accelerated decline in our subscription
revenues.
Demand and pricing for, and volume sold of, online advertising may face downward pressure which would adversely affect our advertising revenues.
During 2009, we experienced lower demand from advertisers across a number of advertiser categories that have been significantly impacted by weak
global economic conditions. In order for us to maintain or increase advertising revenues in the future, we believe it will be important to increase our overall
volume of advertising sold, including sales of advertising through our higher-priced channels, and to maintain or increase pricing for advertising. If overall
demand continues to decline or if overall pricing declines occur, our advertising revenues could be adversely affected.
We are dependent on a third-party search provider.
We do not own or control a general text-based web search service. Instead, Google is, except in certain limited circumstances, the exclusive web search
provider for AOL Properties. In 2009, search advertising revenues comprised approximately one-third of our total advertising revenues. Changes that Google
has made and may unilaterally make in the future to its search service or advertising network, including changes in pricing, algorithms or advertising
relationships, could adversely affect our advertising revenues. Furthermore, except in certain limited circumstances, we have agreed to use Google's
algorithmic search and sponsored links on an exclusive basis in the United States through December 19, 2010. Upon expiration of this agreement, there can be
no assurance that the agreement will be renewed, or, if the agreement is renewed, that we would receive the same or a higher revenue share as we do under the
current agreement. In addition, there can be no assurance that if we enter into an arrangement with an alternative search provider the terms would be as
favorable as those under the current Google agreement. Even if we were to enter into an arrangement with an alternative search provider with terms as or
more favorable than those under the current Google agreement, such an arrangement might generate significantly lower search advertising revenues for us if
the alternative search provider is not able to generate search advertising revenues as successfully as Google currently does.
Because we do not own or control such a search service, we are not able to package and sell search advertising along with display advertising services
outside of AOL Properties. As search advertising represents a significant portion of online advertising spending, we believe that our lack of a proprietary
search service could adversely affect our ability to maintain and increase advertising revenues.
We may need to raise additional capital, and we cannot be sure that additional financing will be available.
While subsequent to our separation from Time Warner we have funded our ongoing working capital, capital expenditure and financing requirements
through cash flows from operations and we currently have available borrowing capacity under our new 364-day senior secured revolving credit facility, we
may require additional
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