America Online 2010 Annual Report Download - page 50

Table of Contents
AOL INC.
PART II—ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Subscription Revenues
Subscription revenues declined 26% for the year ended December 31, 2010 as compared to the year ended December 31, 2009. The decline was due to
an approximate 23% decrease in the number of domestic AOL-brand access subscribers between December 31, 2009 and December 31, 2010 (which is
discussed further in "Overview—Our Business—AOL Properties"). Also contributing to the decline in subscription revenues was a $0.30 decline in domestic
average monthly revenue per AOL-brand access subscriber (which we refer to in this Annual Report as ARPU). Partially offsetting these declines was $5.4
million related to the favorable resolution of a legal dispute with the counterparty to whom we sold our German access business in 2007. 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 between December 31, 2008 and December 31, 2009.
The number of domestic AOL-brand access subscribers was 3.9 million, 5.0 million and 6.9 million at December 31, 2010, 2009 and 2008,
respectively. ARPU was $18.16, $18.46 and $18.38 for the years ended December 31, 2010, 2009 and 2008, 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 noted previously, our access service subscriber base has declined and is expected to continue to decline. While we expect that our subscription
revenues will continue to decline for the foreseeable future, they will provide us with an important source of revenue in the near term.
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 from MapQuest's business-to-business services and licensing revenues from licensing our proprietary ad serving technology to
third parties through our subsidiary, ADTECH AG. In addition, other revenues include amounts associated with hosting certain Time Warner websites on our
servers as part of the transition services provided to Time Warner. Other revenues also include amounts earned in connection with transition support services
for our disposed operations.
Other revenues decreased 9% for the year ended December 31, 2010, as compared to the year ended December 31, 2009 due to lower revenues from
our mobile messaging services of $17.3 million as mobile carriers are moving away from paying on a per message basis and a decline in licensing revenues
from MapQuest's business-to-business services of $6.9 million. These declines were partially offset by increases in third party web hosting revenues of $8.8
million, increases in ADTECH AG and other licensing revenues of $2.7 million and increases in transition services revenue of $2.9 million.
Other revenues decreased 14% for the year ended December 31, 2009 as compared to the year ended December 31, 2008, due to declines in the
revenues associated with the transition support services agreements with the purchasers of our European access service businesses (which ended in 2008).
These agreements contributed $23 million in revenue for the year ended December 31, 2008. The decline in revenue from these agreements was partially
offset by increases in mobile e-mail and instant messaging revenues of $6 million for the year ended December 31, 2009 as compared to the year ended
December 31, 2008.
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