AOL's quarterly ad revenue rose by $71 million, a 28 percent increase over the year-ago period, reports ClickZ. Paid search grew by $31 million, and Advertising.com added $31 million. In the last 12 months, AOL has lost 2.6 million U.S. subscribers, leaving it with 20.1 million. Revenue at parent company Time Warner increased 6 percent to $10.54 billion for the quarter, up from $9.94 billion in the year-ago quarter. Net income rose to $897 million, or $0.19 per share, up from the year-ago $499 million, or $0.11 per share.

AOL has been transitioning from a dial-up and subscriptions-based business to an ad-supported content portal, led by the recently launched AOL.com. "It's a priority for us to accelerate the transition of AOL to an audience-based business," Dick Parsons, Time Warner's chairman and CEO, told investors on a conference call.

Parsons confirmed AOL is in "strategic discussions" with several companies on "a range of potential strategic investments and transactions," but did not name the companies (rumored to be Microsoft, Yahoo and Google) or reveal details: "It's too early to go into details on the nature of the discussions. There may not even be any deal to discuss," he said.