America Online 2009 Annual Report Download - page 50

Table of Contents
advertising revenue for the full year of 2010 is limited due to the impact of our previously announced restructuring efforts, including the restructuring of our
advertising organization, and the fact that many advertising agreements are executed during the quarter that the advertising is displayed. However, based on
current information, we believe domestic display advertising revenues will decline in the first quarter of 2010 as compared to the first quarter of 2009 as a
result of our advertising sales organization restructuring which resulted in the reassignment of a majority of our advertising accounts, significantly lower
monetization of AOL Properties through our Third Party Network and an approximate $5 million reduction (which represents an approximate 40% year-over-
year decline) in advertising revenue related to legacy agreements on certain AOL Properties. Finally, our Third Party Network revenues will be negatively
impacted in 2010 by the international reductions and closures previously discussed as well as the de-emphasis of our search engine campaign management
and lead generation affiliate products, which are discussed in "Overview—Third Party Network" above.
SUBSCRIPTION REVENUES
The 28% decline in subscription revenues for the year ended December 31, 2009, as compared to the year ended December 31, 2008, was due to a 28%
decrease in the number of domestic AOL-brand access subscribers (which is discussed further below). The 31% decline in subscription revenues for the year
ended December 31, 2008, as compared to the year ended December 31, 2007, was due to a 26% decrease in the number of domestic AOL-brand access
subscribers, the sale of our German access service business in the first quarter of 2007, which resulted in a decrease of $88 million for the year ended
December 31, 2008, and a decrease of $51 million related to a decline in non-AOL-brand access subscribers (i.e., CompuServe and Netscape brand access
subscribers).
The number of domestic AOL-brand access subscribers was 5.0 million, 6.9 million and 9.3 million at December 31, 2009, 2008 and 2007,
respectively. The domestic average monthly revenue per AOL-brand access subscriber (which we refer to in this Annual Report as ARPU) was $18.46,
$18.38 and $18.66 for the years ended December 31, 2009, 2008 and 2007, respectively. We include in our subscriber numbers individuals, households and
entities that have provided billing information and completed the registration process sufficiently to allow for an initial log-on to the AOL access service.
Individuals who have registered for our free offerings, including subscribers who have migrated from paid subscription plans, are not included in the AOL-
brand access subscriber numbers presented above. Subscribers to our subscription access service contribute to our ability to generate advertising revenues.
As previously discussed, the continued decline in domestic AOL-brand access subscribers is the result of several factors, including the increased
availability of high-speed broadband Internet connections, the fact that a significant amount of online content, products and services has been optimized for
use with broadband Internet connections and 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. As a result of these factors, we expect
subscription revenues to continue to decline for the foreseeable future. The change in ARPU for the year ended December 31, 2009, compared to the year
ended December 31, 2008, did not have a significant impact on subscription revenues. The decrease in ARPU of $0.28 for the year ended December 31, 2008,
as compared to the year ended December 31, 2007, was due to a shift in the subscriber mix to lower-priced plans, which reduced ARPU by $1.35, and a
decrease in premium services revenues, which reduced ARPU by $0.30. These decreases were partially offset by an increase in the percentage of revenue-
generating customers, which increased ARPU by $0.43, and price increases for lower-priced plans, which increased ARPU by $1.11.
OTHER REVENUES
Other revenues consist primarily of fees associated with our mobile e-mail and instant messaging functionality from mobile carriers, licensing revenues
from third-party customers through MapQuest's business-to-business services and licensing revenues from licensing our proprietary ad serving technology to
third parties through our subsidiary, ADTECH AG. Additionally, other revenues for the years ended December 31, 2008 and 2007 include revenues
associated with transition support services agreements with the purchasers of our European access service businesses.
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