AOL Seeks Eyeballs

Time Warner (TWX) already is gaining ground on its rivals as it prepares for a major overhaul of its AOL Internet unit.

The top 10 advertisers at AOL outspent their counterparts at Microsoft's(MSFT) MSN in the first quarter, according to the most recent available data from TNS Media Intelligence. Yahoo! (YHOO), the No. 1 Web site, attracted the most ad dollars, TNS says. None of the companies would comment on the estimates.

Time Warner is hoping that the changes it announced at AOL last week will help it capitalize on this trend. Though advertisers have praised improvements at AOL in areas such as video content, they point out that Time Warner must still persuade marketers to shift money to AOL from Yahoo! and MSN.

"They just can't rest on their laurels," says Jeff Marshall, who oversees Internet ad buying for Starcom MediaVest. "They are going to have to spend a lot more money on marketing. They are going to need to drive audience and eyeballs."

AOL already has turned to Google(GOOG) to help boost its advertising sales. Last year, Google acquired a 5% stake in AOL for $1 billion. Google also wants more branded advertising spending for itself and is encouraging companies that usually rely on portals to use search instead.

Time Warner expects to save $1 billion through next year as it quits marketing AOL's fading dial-up access business to seek more advertising revenue. AOL is also cutting 5,000 jobs. The company has said the overhaul won't have a material impact on its bottom line.

Investors, who have long considered AOL a drag on Time Warner's stock, may not be willing to wait long for a turnaround. The unit continues to be one of the company's laggards, showing an anemic 2% revenue gain in the second quarter. Shares of the parent company of CNN and Warner Bros. have dropped 5% this year.