America Online 2009 Annual Report Download - page 42

Table of Contents
AOL PROPERTIES
We seek to be a leading online provider of consumer products and services, as well as a publisher of relevant and engaging online content by utilizing
open and highly scalable publishing platforms and content management systems. In addition, we plan to extend the reach of our offerings to a consumer
audience on multiple platforms and digital devices.
We generate advertising revenues from AOL Properties through the sale of display advertising and search and contextual advertising. We offer
advertisers a wide range of capabilities and solutions to effectively deliver advertising and reach targeted audiences across AOL Properties through our
dedicated advertising sales force. We seek to provide effective and efficient advertising solutions utilizing data-driven insights that help advertisers decide
how best to engage consumers. We offer advertisers marketing and promotional opportunities to purchase specific placements of advertising directly on AOL
Properties (i.e., in particular locations and on specific dates). In addition, we offer advertisers the opportunity to bid on unsold advertising inventory on AOL
Properties utilizing our proprietary scheduling, optimization and delivery technology. Finally, advertising inventory on AOL Properties not sold directly to
advertisers, as described above, may be included for sale to advertisers with inventory purchased from third-party publishers in the Third Party Network.
Growth of our advertising revenues depends on our ability to attract consumers and increase engagement on AOL Properties by offering compelling
content, products and services, as well as on our ability to monetize such engagement by offering effective advertising solutions. In order to attract consumers
and generate increased engagement, we have developed and acquired, and in the future will continue to develop and acquire, content, products and services
designed to meet these goals.
We have made and are exploring making additional changes to our content, products and services designed to enhance the consumer experience (e.g.,
fewer advertisements on certain AOL Properties). These changes have involved and may continue to involve the elimination or modification of advertising
practices that historically have been a source of revenues. These enhancements to the consumer experience are intended to ultimately increase our revenues by
increasing the attractiveness of our content, product and service offerings to consumers and therefore their value to advertisers. Specifically, we have
undertaken efforts on certain AOL Properties to reduce the number of display advertising units, reduce monetization of search results and reduce the number
of contextual advertising links. While difficult to quantify, we believe that these changes will have a negative impact on our advertising revenues in the near
term, but we do not believe this impact will be significant.
Google is, except in certain limited circumstances, the exclusive web search provider for AOL Properties. In connection with these search services,
Google provides us with a share of the revenue generated through paid text-based search and contextual advertising on AOL Properties. For the year ended
December 31, 2009, advertising revenues associated with the Google relationship (substantially all of which were search and contextual revenues generated
on AOL Properties) were $556.7 million. Domestically, we have agreed, except in certain limited circumstances, to use Google's search services on an
exclusive basis through December 19, 2010. Upon expiration of this agreement, we expect to continue to generate advertising revenues by providing paid-
search advertising on AOL Properties, either through the continuation of our relationship with Google or an agreement with another search provider.
We view our subscription access service, which we offer to consumers in the United States for a monthly fee, as a valuable distribution channel for
AOL Properties. In general, subscribers to our subscription access service are among the most engaged consumers on AOL Properties. However, our access
service subscriber base has declined and is expected to continue to decline. This decline is the result of several factors, including the increased availability of
high-speed broadband Internet connections, the optimization of a significant amount of online content, products and services for use with broadband Internet
connections, the effects of our strategic focus on advertising, which has led to significantly reduced marketing efforts for our subscription access service, and
the free availability of the vast majority of our content, products and services. See "Item 1A—Risk Factors—Risks Relating to Our Business—Our strategic
shift to an online advertising-supported business model involves
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