19 October 2000

World-leading internet portal America Online announced an 88% rise in profits for the first fiscal quarter, but concerns remain over its ability to attract advertising.

Although AOL posted higher than expected ad revenues, it failed to improve on last quarter’s $3 billion backlog of sales yet to be booked.

Chairman and chief executive Steve Case blamed the static backlog on short-term deals with large advertisers: “In many cases, with the larger companies we try to have shorter deals”, he stated, “We want to get them started on the service and then we can renew them at higher rates”.

Although the size of the backlog has convinced some analysts that AOL can withstand the current slump in online advertising, others are less happy at the figure. “In this environment with pressure on advertising, we'd like to see nice long-term deals”, said analyst John Corcoran. “We'd like to see that backlog continuing to climb”.

Revenue from ads and e-commerce is becoming increasingly important for AOL as subscriber growth rates decline.

News source: Wall Street Journal