We want a customer relationship with as many people as we can possibly have. The business we were in -- and the reason why Wall Street questioned our growth prospects -- was because the premium narrowband business was declining. People either migrated off to broadband or were going to these low-cost ISPs (Internet service providers). What we had was a declining narrowband business that we were always trying to protect. Before the change in strategy, we were afraid to offer anything else.
There are a lot of people who don't want AOL for connectivity. We want to do more with them. If you look at areas of growth on the Web, it's primarily coming from customer touches, advertisers and search. We want to maintain a large customer base and as large a customer touch point as we can.
Last quarter, you said you expect to see a growth in advertising this year, much of that coming from search. Google gave you guys $200m in revenue in 2003. Is part of reason why you want to make a greater push on the Web to give the Google relationship a wider scope?
It's not Google, because Google will not be the majority of the advertising that we carry in the reported advertising number at the end of the year. CPM (cost per thousand, or impression)-based advertising is important to us. I said advertising is going to grow, overall. Search is a part of that. But our overall underlying advertising base is growing as well. The reason why it was hard to see that trend for a while was because we had long-term deals burning off, and they fell out of the system. We peaked in 2001, and most of the deals were long-term deals that weren't sustainable. So we had to wash all that out of the system.
But advertising has turned. We want as much inventory as we can possibly get to tap into this growing market, because we do have this rising tide in the market now. Advertisers are looking at the Internet more closely. And we need to serve them with as broad an audience as we possibly can, with as diverse an array of products as we can.
Does it make sense for Time Warner to keep AOL as a business in its family?
It makes sense if AOL can develop a sustainable business model that allows it to grow comparable to our other businesses, or greater, over a long period of time. I say that because if you asked me if we should stay in the publishing business, I'd give you the same answer. I think the publishing business is wonderful, and I think it has many opportunities ahead. I think it's important to continue to look at our mix of assets as a company. We sold music this year because of that reason. We sold music because, if you looked out in the future, it was hard to see how we were going to sustain the growth rate that we needed for the growth of our company overall.
Personally, I believe that AOL is going to continue to grow over the next several years. And that's the question that everyone's been asking, because we've been dropping subscribers until this year. We said we bottomed out last year. You have to remember that a significant amount of the advertising that was driven by the Internet bubble went away. It's impossible to pick up the bottom line and move forward. Everyone was focused solely on that. There were other good things happening, however. In Europe, for example, three years ago, it lost $600m (£335m), and it broke even last year. It was a huge swing, and it's profitable right now.
