AOL still has a way to go before profiting in the internet ad space, after it saw a slight gain in its online advert business for the first quarter of 2008. AOL is trying to move away from its declining ISP (Internet service provider) business.

AOL's revenue dropped 23 percent to $330m, compared to $1.1bn for the same quarter last year, said parent company Time Warner yesterday. Subscriber revenue declined 38 percent, or $334m.

Online advertising revenue was up 1 percent to $3m, a gain that came from growth in ad sales on thirty-party websites and paid-search advertising. Display advertising declined, Time Warner said.

AOL is trying to transform itself into an online-advertising powerhouse to compete with Google and, to a lesser, extent Microsoft and Yahoo. All are trying to capitalise on the shift of advertising dollars from television and print media to the internet.

AOL's operating income fell from $1.284bn a year prior to $284m this quarter, a 74 percent decline. The sharp decline was also due to AOL selling part of its German ISP business in the quarter a year before, which added a $670m gain.

At the end of March, AOL counted 8.7m subscribers in the US, a loss of 647,000 from the previous quarter, the company said. The declines were expected, Time Warner said.

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