AOL expects large drop in ad revenue in 2003 –

AOL Time Warner Inc. (AOLTW) is expecting steep declines next year in advertising and commerce revenue for its Internet division, America Online Inc. (AOL), the media conglomerate said Tuesday.

AOLTW forecast flat revenue growth for the division in 2003 compared with 2002, due in large part to declines in advertising and commerce revenue of 40 percent to 50 percent, though those losses are expected to be offset somewhat by worldwide growth in AOL's subscription revenue, the company said in a statement.

The financial forecast is the curtain raiser to "AOL Day," where the company is set to unveil its new service-bolstering strategy for the ailing AOL to company executives, analysts and the press later in the morning in New York.

Among other things, AOL is expected to announce that it will be the exclusive provider of Web content from Time Inc. publications such as People and Entertainment Weekly, and that it is throwing more weight behind its broadband service.

AOLTW reaffirmed its earlier guidance of total revenue of between US$8.8 billion and $9.0 billion for AOL's full year in 2002, with advertising and commerce revenue to be between $1.5 billion and $1.6 billion, the company said. The company also expects full year 2002 EBITDA (earnings before interest, taxes, depreciation and amortization) of between $1.7 billion and $1.8 billion, it said.

For 2003, the company expects EBITDA to decrease 15 percent to 25 percent year over year, AOLTW said.

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