Surging advertising sales on AOL and strong subscriber growth in its cable, Internet and phone businesses pushed Time Warner to profit growth in the first quarter that exceeded analyst forecasts. The media giant reported earnings of $1.2 billion. Last summer, AOL began offering its services for free to attract more users as well as more online ad dollars.
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Time Warner (NYSE: TWX) has reported first-quarter profits that outperformed Wall Street expectations, mostly on the strength of its rise in new cable, Internet and phone subscribers, as well as strong online ad sales 
.
Shares of the world's largest media company rose more than 3 percent as it reported a 40 percent increase in AOL advertising.
Although earnings fell to US$1.2 billion, or 31 cents per share, from $1.5 billion, or 32 cents per share, a year earlier, those numbers included a gain of 6 cents per share from a string of asset and investment sales.
The New York-based company reported sales of $11.2 billion -- in line with analysts' forecasts and up 9 percent from a year earlier.
Ad growth at AOL this year is likely to be at or above U.S. industry rates, but probably below 40 percent, according to Time Warner.
The company's strategy of building its share of the fast-growing Internet advertising market while letting income from subscriptions rise has been successful, said Bruce McGregor, senior analyst with Current Analysis.
"The results benefited from double-digit percentage profit increases at the AOL and cable services divisions," McGregor told the E-Commerce Times. "They are still building the services out."
The cable business was the main driver of the higher revenues, up 61 percent.
As expected, strength in Time Warner's cable operations was offset by weakness in its film division, where revenue fell 1 percent to $2.7 billion.
Time Warner's movie studios, including Warner Brothers, faced tough competition last year. Movie division revenue failed to beat year-earlier sales boosted by "Harry Potter" and "Wedding Crashers" DVDs.
Other divisions were also flat, according to Time Warner. The company's publishing unit revenue fell 1 percent, and operating income declined 49 percent because of higher restructuring costs.
Last summer, AOL began offering its services for free to attract eyeballs as well as online ad dollars.
So far, says McGregor, the strategy seems to be paying off.
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