AOL CEO Miller

AOL says sales may shrink in the coming two years as a result of having begun to offer its products and services for free.

AOL's sales in the second quarter fell two percent as it shifted from a subscription-based to free, ad-based revenue model, Reuters reports, citing an interview with AOL CEO Jonathan Miller by German newspaper Die Welt. AOL will, for now, focus on profitability rather than revenue - and had profits of 20-25 percent of sales in its internet access business and more than 50 percent in its advertising business, Miller is quoted as saying. Moreover, Time Warner's online advertising revenues jumped 40 percent to $449 million in the second quarter, suggesting that the strategy to go free is paying off.

Asked whether Time Warner may yet spin off AOL, Miller said likely not, since "most media companies are looking for a way into the digital business" - but noted that an IPO might be "an option." Time Warner announced this week that it would float its cable TV unit.

Miller also said AOL plans to expand in Europe and is moreover looking at acquisitions. It apparently entertained thoughts of bidding for social-networking site Facebook - but eventually decided not to pursue it because of the rumored $1 billion price tag.