e-commerce boosts AOL profits to $1.2 billion

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America Online, the world’s richest internet company, beat analysts’ expectations when it announced profits of more than $1.2bn in its financial year which ended on 30 June.

The company had sales of $6.8bn for the year, the bulk of which came from the subscriptions paid by its members, who are mainly in the United States. AOL added 900,000 more subscribers in the year’s last quarter, bringing its total membership to 23.2m.

But what encouraged analysts most was the rapid growth of its revenues from e-commerce and advertising, which grew by 95 per cent in the quarter to $609m. It now makes up one-third of the company’s revenues, which totalled $1.9bn for the quarter, a 39 per cent increase on the previous year.

The company’s profits doubled to $333m, or 13 cents per share, above estimates of 11 cents per share.

AOL also announced a major alliance with financial services company Citigroup to access an individual’s financial data on the web and make payments easier.

AOL CEO Steve Case said: “This has been a record-breaking year for America Online, and we finished on a strong note with this quarter’s performance. We added an all-time high of 5.6 million AOL members this year, bringing membership to more than 23 million worldwide. Just four years after becoming the only internet company with $1 billion in annual revenues, we are now posting $1 billion in annual profits.”

He added: “We are more excited than ever about the enormous potential of AOL Time Warner. Shareholders of both companies voted to approve the merger, and we are on track to close this fall. As this quarter’s results demonstrate, even as we work diligently to ensure that the merger continues to proceed smoothly, we are committed to delivering outstanding performance.”

COOBob Pittman said: “We are continuing to drive up our advertising and e-commerce revenues through an increasing number of partnerships with leading brands and retailers.

“Our next-generation AOL 6.0 software, which will launch later this year, once again will set new standards for convenience and functionality, as well as privacy and security. We are quickly turning the promise of our ‘AOL Anywhere’ strategy into reality with the launches of AOLTV, AOL Plus and, in the future, the AOL/Gateway family of internet appliances. And, importantly, our AOL Mobile initiatives with Sprint PCS and AT&T Wireless are bringing hallmark AOL features and benefits to valuable new wireless customers.”

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