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AOL Says It Will Let New Acquisition Maintain Its Course

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  AOL chief executive Jonathan Miller says he plans to let the company's profitable new acquisition, Advertising.com, operate essentially as it has. (2002 Photo Emile Wamsteker -- Bloomberg News)


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Insider Case At AOL Shows Vulnerability (The Washington Post, Jun 26, 2004)
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In recent quarters, America Online has been losing dial-up subscribers, but its advertising revenue has increased from fees earned from a partnership it has with Google Inc., which provides Web search services for AOL users. Miller said that by owning Advertising.com, AOL is positioning itself to grab a greater chunk of ad revenue growth than it could by merely partnering with the firm.

Miller's interest in buying Advertising.com was piqued by a meeting he hosted at AOL headquarters this spring with the company's chief executive, Scott A. Ferber, and other members of senior management. Toward the end of that session, Ferber made it clear that Advertising.com needed capital to grow and was prepared to go public to raise funds.

"There was a real meeting of the minds," Miller recalled of his initial discussions with the 34-year-old Ferber, his brother Scott, who serves as vice chairman, and W. Gar Richlin, the company's chief operating officer.

In May, Advertising.com filed papers with the Securities and Exchange Commission outlining plans to sell stock to the public. Miller said the filing forced him to focus more intensely on the prospects for an acquisition, since it would be simpler to accomplish, and perhaps less costly, while Advertising.com was still privately owned.

Youssef Squali, an analyst with Jefferies & Co., described AOL's pending acquisition of Advertising.com as a "smart move."

"Strategically it does make sense," Squali said. "It puts the company more squarely within the sweet spot of online advertising."

The board of Time Warner Inc., AOL's parent, approved the acquisition in a conference call last week. While the transaction, which is subject to regulatory approval, is a small deal for media giant Time Warner, it is a big deal in Dulles, where it is seen as a major vote of confidence in Miller that offers the potential to expand AOL's reach on the Web.

"We are leaning into growth areas going forward," Miller said. "It is a signaling deal more than a signature deal."

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