Giant of the dot.com world

New media shares have been hammered during the year that it has taken AOL and Time Warner to complete their mega-merger.

Internet shops such as fashion retailer Boo.com have passed away, e-commerce firms such as Priceline are in deep trouble, and even top portals such as Yahoo are suffering very sharp share price declines.

But AOL Time Warner looks set to survive the doom and gloom of the dot.com world far better than its ailing rivals.

It is the combination of new and traditional media, together with multiple ways of making money, that protects AOL Time Warner and suggests a model of survival for some of the weaker internet companies.

Money-spinner

AOL Time Warner will not be entirely insulated from the broad trends that are hitting the internet sector, such as reduced advertising revenue.

Perception has changed, but if anybody is going to succeed, then AOL Time Warner will.

Theresa Wise
Accenture

But it has many different streams of making cash, including monthly subscription charges of about $20 from more than 24m subscribers - that is above $480m.

This stands in stark contrast to Yahoo, which generates almost 90% of its revenue from advertising.

And AOL Time Warner's business model is extremely good, with about a third of its $7.7bn income translating into profits, says Dan Bieler, an internet analyst at Nomura.

Safe bet

AOL Time Warner are not completely immune to the negative outlook seen across much of the rest of the industry, and the share prices of both parts of the new company have suffered considerable losses.

AOL's shareprice has fallen to $47 from a high of $80 at the end of March, while Time Warner stock is now trading at $71.19, $35 lower than its high last April.

AOL Time Warner is a much safer bet for the future

Dan Bieler
Analyst, Nomura

But the fall is not nearly as drastic as some of its competitors such as UK portal Freeserve and retailer Priceline.

And however severe the slump in internet shares becomes, no one disputes the fact that the internet is here to stay.

The weaker players and less profitable business models are being weeded out, but some internet companies can still be winners.

And a company which has a leading position in both the new and traditional media sectors in the US, which accounts for 60% of the global media arena, is one of the strongest contenders to become a truly big-time winner.