SEC Queries More AOL TW Ad Deals

23 April 2003

Yet more ad deals made by AOL Time Warner are reportedly under investigation by US regulators.

In its ongoing probe of the media mammoth, the Securities & Exchange Commission has, say unnamed insiders, identified three further advertising agreements worth millions of dollars that may have been improperly booked as revenues.

The latest accounts probe follows AOL TW’s admission last year that it incorrectly reported $190 million (€173m; £120m) in ad arrangements as revenue [WAMN: 24-Oct-02]. Also under SEC investigation are separate deals worth $400m with German media group Bertelsmann [WAMN: 31-Mar-03].

The three agreements now being scrutinised are a $100m tie-up with jobs website and two smaller pacts with Catalina Marketing and healthcare service

The deal is suspected of being a ‘round-trip’ arrangement, where each party agrees to market the other but neither makes a profit out of it. Although there is nothing wrong with such an arrangement, neither party should record it as revenue – though this is exactly what AOL TW may have done.

The Catalina tie-up was a two-year, $10m supermarket advertising contract. It is claimed the media giant improperly began running ads on the AOL website earlier than agreed in a bid to boost revenues for the first quarter of 1998.

Finally, the four-year, $89m Drkoop deal was signed in 1999 but fell apart in 2000. The SEC believes AOL TW incorrectly reported the $9.6m termination fee as ad revenues.

Drkoop has since been acquired by, which plans to sue AOL TW. “We feel that AOL misrepresented the performance of their ad campaigns,” accused Vitacost ceo Wayne Gorsek said. “We feel we were misled by the AOL salesperson and management.”

Data sourced from: Washington Post Online; additional content by WARC staff