America Online 2010 Annual Report Download - page 11

Table of Contents
Our major access service partners are Level 3 Communications, LLC and MCI Communications Services, Inc., who provide us with modem networks
and related services for a substantial portion of our subscription access service. We have agreed to commit a significant portion of our access service
subscribers' total dial-up network hours to the Level 3 and MCI networks. More specifically, 30% of our total dial-up network hours are presently committed
to Level 3, and 50% of our total dial-up network hours are presently committed to MCI. Through take or pay provisions in each agreement, we will incur
penalty payments if we fail to dedicate the required percentage of dial-up hours to these service partners. As of December 31, 2010, we are meeting our
volume commitments to each of these service partners. We have agreed to use the Level 3 and MCI networks until March 31, 2011 and December 31, 2014,
respectively. The agreement with MCI may be renewed at our option until December 31, 2015. Upon expiration of these agreements, we expect to continue
our relationships with Level 3 and MCI or enter into agreements with one or more other providers of modem networks and related services.
Our access service subscriber base has declined and is expected to continue to decline as a 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 shift announced in 2006, which resulted in us essentially eliminating our 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 significant risks".
OTHER DISTRIBUTION CHANNELS
We also distribute AOL Properties through a variety of other channels, including agreements with manufacturers of digital devices and other consumer
electronics, broadband access providers and mobile carriers. AOL also distributes its content, products and services directly to consumers on the open web
and through the Apple Apps Store. Additional distribution channels include toolbars, widgets, co-branded portals and websites, and third-party websites and
social networks that link to AOL Properties. We also utilize search engine marketing and search engine optimization as distribution methods. In addition, we
make available open standards and protocols for use by third-party developers to enhance, promote and distribute AOL Properties.
AOL seeks to make its AOL Properties and original content as well as other products and services available on social networks, whether offered
directly or by means of partnerships with social networks operators.
AOL Properties Revenue Generation
ADVERTISING REVENUES
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. The substantial number of unique visitors on AOL Properties allows us to offer advertisers the capability of reaching a broad
and diverse demographic and geographic audience without having to partner with multiple content providers. 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 unreserved 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.
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