America Online 2010 Annual Report Download - page 6

Table of Contents
ITEM 1. BUSINESS
Introduction
We are a leading global web services company with an extensive suite of brands and offerings and a substantial worldwide audience. Our business
spans online content, products and services that we offer to consumers, publishers and advertisers. We are focused on attracting and engaging consumers and
providing valuable online advertising services on both our owned and operated properties and third-party websites.
The Spin-Off
In the fourth quarter of 2009, the Board of Directors of Time Warner Inc. ("Time Warner") approved the complete legal and structural separation of
AOL Inc. from Time Warner (the "spin-off"), following which we became an independent, publicly-traded company. In the spin-off, which occurred on
December 9, 2009, Time Warner distributed to its shareholders of record all of the shares of our common stock that it owned at a ratio of one share of AOL
common stock for each 11 shares of Time Warner common stock held by each such holder as of November 27, 2009, the record date for the spin-off. On
December 10, 2009, after completion of the spin-off, our common stock began trading "regular way" on the New York Stock Exchange under the symbol
"AOL".
Our Relationship with Time Warner
Since the spin-off, our Company and Time Warner have operated independently, and neither has any ownership interest in the other. In order to govern
certain of the ongoing relationships between us and Time Warner after the spin-off and to provide mechanisms for orderly transition, we and Time Warner
entered into agreements pursuant to which certain services and rights were provided for following the spin-off, and we and Time Warner have agreed to
indemnify each other against certain liabilities arising from our respective businesses.
Restructuring
We continue to undertake various restructuring activities in an effort to better align our organizational structure and costs with our strategy. We reduced
our total workforce by nearly one-third in connection with a significant restructuring initiative that was largely completed during the first quarter of 2010,
prior to hiring new employees in areas of strategic focus. In connection with our restructuring activities, we have ceased or reduced our operations in a
number of countries.
Background
Historically, our primary strategic focus was our dial-up Internet access services business which operated one of the largest Internet subscription access
services in the United States. As broadband penetration in the United States increased, we experienced a decline, which we continue to experience, in
subscribers to our access service. At the same time, online advertising experienced significant growth. In 2006, we fundamentally shifted the primary strategic
focus of our business from generating subscription access revenues to attracting and engaging Internet consumers and generating advertising revenues. In
connection with this shift, we began offering the vast majority of our content, products and services to consumers for free in an effort to attract and engage a
broader group of consumers. Since 2006, we also have essentially eliminated our marketing and distribution of the software necessary for consumers to utilize
the dial-up service. Although our primary strategic focus has shifted, our subscription access service remains an important source of our total revenues and
cash flows.
Our strategy is focused primarily on attracting and engaging Internet consumers by creating high quality content, products and services at scale and
generating advertising revenues, with our subscription access service managed as a valuable distribution channel for our content, product and service
offerings.
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