Advertising Revenues
Across our segments, our advertising operations focus on the following:
AOL Properties. We sell advertising on AOL Properties, which include owned and
operated content, products and services included in the Membership Group and
Brand Group segments. AOL Properties also include co-branded websites owned
or operated by third parties for which certain criteria have been met, including
that the internet traffic has been assigned to us.
Third Party Network. We also sell advertising on the Third Party Network and
offer advertising services to the publishers of these sites.
We market our offerings to advertisers on both AOL Properties and the Third
Party Network under the brand “AOL Advertising” and collectively
we refer to our total advertising offerings as the AOL Advertising Network.
AOL Properties Advertising Revenue
We generate advertising revenues in our segments through the sale of display
advertising and search advertising. We offer advertisers a wide range of capabilities
and solutions to effectively deliver advertising and reach targeted audiences
across AOL Properties through our dedicated advertising sales force. A significant
area of our focus is on offering customized premium advertising. The substantial
number of unique visitors on AOL Properties allows us to offer advertisers the
capability of reaching a broad and diverse demographic and geographic audience
without having to partner with multiple content providers. We seek to provide
effective and efficient advertising solutions utilizing data-driven insights
that help advertisers decide how best to engage consumers. We offer advertisers
marketing and promotional opportunities to purchase specific placements of advertising
directly on AOL Properties (i.e., in particular locations and on specific dates).
In addition, we offer advertisers the opportunity to bid on unreserved advertising
inventory on AOL Properties utilizing our proprietary scheduling, optimization
and delivery technology. Finally, advertising inventory on AOL Properties not
sold directly to advertisers, as described above, may be included for sale to
advertisers by AOL Networks with inventory purchased from third-party publishers.
In addition, agreements with advertisers can include other advertising-related
services such as content sponsorships, exclusivities or advertising effectiveness
research.
Display advertising revenues are generated through the display of graphical
advertisements as well as performance-based advertising. Agreements for advertising
on AOL Properties typically take the following forms:
impression-based contracts in which we provide “impressions” (an
“impression” is delivered when an advertisement appears in web pages
viewed by users) in exchange for a fee (generally stated as cost-per-thousand
impressions);
time-based contracts in which we provide promotion over a specified time period
for a fixed fee; or
performance-based contracts in which performance is measured in terms of either
“click-throughs” (when a user clicks on a company’s advertisement)
or other user actions such as product/customer registrations, survey participation,
sales leads, product purchases or other revenue sharing relationships.
Search Advertising Revenues
Search advertising revenues are generated on AOL Properties when a consumer
clicks on a text-based ad on their screen. These text-based ads are either generated
from a consumer-initiated search query or generated based on the content of
the webpage the consumer is viewing. Google is, except in certain limited circumstances,
the exclusive web search and search-based advertising provider for AOL Properties,
based on our agreement that runs through December 31, 2015. In connection with
these search services, Google provides us with a share of the revenue generated
through paid text-based search advertising and contextual advertising on AOL
Properties.
Substantially all of these revenues were search revenues generated on AOL Properties,
with a significant majority generated within the Brand Group and to a lesser
extent within the Membership Group. AOL and Google also have a video partnership
that features AOL’s video content on YouTube.
Third Party Network Advertising Services
Our AOL Networks segment generates advertising revenues through the sale of
advertising on the Third Party Network. Our advertising offerings on the Third
Party Network consist primarily of the sale of display advertising and also
include search advertising. Advertising arrangements for the sale of Third Party
Network inventory typically take the form of impression-based contracts or performance-based
contracts. In order to generate advertising revenues on the Third Party Network,
we incur higher traffic acquisition costs (“TAC”) as compared to
advertising on AOL Properties.
Subscription Revenues
The Membership Group generates subscription revenues principally through our
subscription services products we offer to consumers.
