AOL to split its access and advertising businesses next year

Time Warner CEO Jeff Bewkes confirmed yesterday that his company will split its Internet division into two components, while stopping short of spinning either off or selling them as was expected.

The split, expected to be completed by early next year, may make it easier for Time Warner to sell either or both units, or to spin off those units into separate entities. While AOL's dial-up business has been the target of most of the sell-off speculation, AOL may also get rid of its advertising business as well.

Initially ballyhooed as the future of AOL's business, online advertising has not yet panned out as expected for parent Time Warner. AOL had originally hoped to support the online service through selling ads following its announcement of making the service free, but so far, it has been unable to generate the expected revenues.

This quarter was no exception: The advertising division managed to only grow a meager two percent year over year, while AOL overall declined 16%. Much of this was due to a 29% drop in subscriber revenues as a result of its transition to a free service.

It is likely that a buyer could be found for either one or both divisions. EarthLink has already expressed interest publicly in AOL's dial-up business, while the company is rumored to be in talks with both Yahoo and Microsoft to divest the advertising business.

What this would essentially amount to is a sale of AOL -- something Time Warner just a year ago denied it was planning. It does appear though that the company is planning to refocus on its core entertainment business from here on out.

"As we continue to reshape Time Warner, we'll increasingly focus on our goal to create and manage high-quality branded content, across multiple platforms around the world, at the highest returns possible for our stockholders," Bewkes said.