Visitors walk past the exhibition stand of Electronic Arts (EA) at the Gamescom 2010 fair in Cologne August 18, 2010.

Credit: Reuters/Ina Fassbender

FRANKFURT Aug 15 (Reuters) - Video games publisher Electronic Arts (EA) is upbeat about Christmas holiday sales as it expects to release top titles and prepares its most high profile launch ever: "Star Wars: The Old Republic".

"We think it should be a very attractive season for Electronic Arts as we have quite a few blockbusters in the pipeline," Jens Uwe Intat, the head of sales and distribution for Europe, told Reuters ahead of Gamescom, Europe's biggest video games trade fair.

The company, which develops games for the consoles of Sony Corp, Nintendo and Microsoft, also said it was optimistic about the launch of the widely anticipated online game "Star Wars: The Old Republic,"

The launch date for the new game has not yet been named, but Intat said he hoped it would be announced before the holiday season.

"We have lots of people who have been subscribing to newsletters and webpages so we are actually feeling very bullish about the game," Intat said.

He added that the company was "still in the process of fine-tuning" services for the game.

EA hopes the online game will rival Activision Blizzard "World of Warcraft", which has more than 12 million subscribers. EA is said to be spending more than $100 million to develop "Star Wars".

Other big games in EA's Christmas line-up include the shooter game "Battlefield 3", racing game "Need for Speed" and "Sims Pet".

The company's soccer game, "FIFA", which is due to launch at the end of September, has already taken record-breaking pre-orders, Intat said.

PLAY BEFORE YOU PAY

Another strand of EA's strategy is to focus on Facebook games, which are free to play.

The games make money from players who buy so-called microtransactions in games such as costumes or tools which enhance game experience, Intat said.

This business model, which is a departure from how video games have traditionally made money, is in the spotlight as social gamemaker Zynga has filed with US regulators for an initial public offering on the stock market worth up to $1 billion.

Advertising in the free-to-play games has the potential to be a revenue-driver in the future, Intat said, adding that "more and more consumer goods companies understand that and embrace that type of advertising opportunity".

The company is striving to improve on its current position in the social gaming space by introducing some of its franchises like "The Sims Social" on Facebook.

EA acquired Playfish, a leading maker of social network games, in November 2009 in a bid to make headway with its diversification strategy and in August it closed the acquisition of PopCap games, the maker of "Bejeweled." [nN1E76B1O4]

(Additional reporting by Liana B. Baker; editing by Patrick Graham)

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(AFP/File) - A religious court official in Indonesia has blamed social networking site Facebook for a rise in teenage pregnancies and under-age marriages.(AFP/File/Leon Neal)

A woman walks out of AOL offices in New York, November 19, 2009.

Credit: Reuters/Shannon Stapleton

NEW YORK (Reuters) - AOL Inc reported a surprise second-quarter loss on Tuesday, citing weaker-than-expected advertising growth that sent shares of the company plummeting as much as 20 percent on Tuesday.

The company, which Time Warner spun off after a disastrous decade-long merger, is trying to regain its former status as one of the world's most popular online destinations by investing heavily in efforts such as hyperlocal news network Patch and by blockbuster purchases like the Huffington Post.

Advertising revenue rose 5 percent to $319 million. Sales of display ads -- big splashy units that appear on Web pages -- gained 14 percent, but Evercore Partners analyst Ken Sena was expecting a 25 percent increase.

While AOL has finally made progress turning its advertising revenue around after several quarters of declines, Chief Executive Officer Tim Armstrong said display growth should have been stronger.

"We had the ability to capture more than we did," Armstrong said during a call with analysts.

Integration of the Huffington Post into AOL's properties had to do partly with the slowdown in June display ad sales with July trending the same, said Arthur Minson, chief financial officer of AOL.

Investors punished AOL shares, causing a halt in trading twice during the morning because of volatility.

AOL recently reorganized its sales force at the end of July as a part of an effort to boost lagging advertising demand. At that time, its head of advertising -- former Google executive Jeff Levick -- left the company.

"From an investor standpoint, didn't we go through this last year?" Sena said. "To be honest, you have so many buying opportunities out there where the stocks have strong fundamental stories."

Still Armstrong insisted on the call that the shake-up was not another reorganization -- one of several that AOL has been through over the past couple of years -- and that the sales force remained intact.

"It's about us improving the operations of our advertising business globally," he said.

The company is still waiting for sales at Patch -- an ambitious project consisting of 800 local community Websites-- to kick in.

Armstrong said AOL could do a better job growing revenue at Patch and monetizing traffic and revenue at some of the Huffington Post media properties.

AOL is up against Google as well as newer rivals like Facebook and Twitter. Its share of online U.S. ad revenue is expected to decline 2.7 percent this year, down from 3.4 percent in 2010, according to research firm eMarketer.

Revenue fell 8 percent to $542.2 million, on a 23 percent drop in subscription revenue. Analysts were expecting revenue of $530.4 million.

The company said its second-quarter loss had narrowed to $11.8 million, or 11 cents per share, from $1.06 billion, or $9.89 per share, a year earlier, when it took a goodwill impairment charge of $1.41 billion.

Analysts on average were looking for a profit of 4 cents per share, according to Thomson Reuters I/B/E/S.

(Additional reporting by Saqib Iqbal Ahmed and Sayantani Ghosh in Bangalore; Editing by Saumyadeb Chakrabarty, Lisa Von Ahn and Gunna Dickson)

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(AFP/Getty Images/File) - Randi Zuckerberg, the sister of Facebook co-founder Mark Zuckerberg, pictured in July 2011, and the director of marketing for the social network, is leaving to start her own company, Facebook said Wednesday.(AFP/Getty Images/File/Justin Sullivan)

An online coupon sent via email from Groupon is pictured on a laptop screen November 29, 2010 in Los Angeles.

Credit: Reuters/Fred Prouser

SAN FRANCISCO (Reuters) - Groupon Inc, which more than doubled subscribers this year to 115 million, plans to abandon the use of a controversial financial measure it once touted as a good indicator of performance, two sources with knowledge of the situation said.

The No. 1 daily deals website, which now dwarfs closest rival LivingSocial's membership base, caved to pressure from investors and will stop referring to a metric called Adjusted Consolidated Segment Operating Income (ACSOI) that excludes marketing costs, one of the sources told Reuters.

Groupon, speeding toward one of 2011's most highly anticipated IPOs, plans to file amended S-1 IPO documents next week giving an update of its performance, both sources said.

The phenomenal pace of growth will be unveiled in that filing and likely give its IPO a boost, despite fears about its need to spend heavily to lure new users and worries of another dotcom bubble brewing reminiscent of the late 1990s.

"There are few growth opportunities on the scale of companies like Groupon," said Lou Kerner, vice president in equity research at Wedbush Securities. "That's really what a lot of investors are seeking today."

Founded by Northwestern music major Andrew Mason in 2008, Groupon filed to raise $750 million in an IPO this year. In April, a source said Groupon could raise $1 billion, valuing it at $15 billion to $20 billion.

Social media firms like LinkedIn Corp have had spectacular debuts, stoking interest for offerings by the likes of Facebook and Twitter. But doubt is growing on Wall Street about whether the buzz surrounding the new Web generation is justified, with the hype recalling the atmosphere prior to the dotcom collapse of 2001.

That caution may have led some to question Groupon's use of "ACSOI", which excludes not just online marketing expenses but also stock-based compensation and acquisition-related items.

Other investors question whether Groupon will be able to cut marketing spending in future.

In the first quarter of 2011, Groupon reported a $117 million operating loss, but ACSOI was almost $82 million. That's because some $180 million of online marketing spending -- plus more than $18 million of stock-based employee compensation -- had been stripped out.

Tech blog All Things D first reported that Groupon would drop all references to ACSOI in future IPO filings. The news comes after reports the U.S. Securities and Exchange Commission was taking a closer look at Groupon's IPO -- and ACSOI.

A spokesman for the company declined to comment.

DOUBTS GROWING

Groupon offers discounts on everything from dining to sky-diving excursions. The "group" in its name refers to the fact that many deals are activated only when a certain number of people sign up. Discounts often run from 50 to 70 percent.

It had 50.58 million subscribers at end-2010. That jumped 64 percent to 83.1 million at the end of the first quarter. Since March 31, that number of subscribers climbed about 38 percent to 115 million -- several times LivingSocial's.

Revenue surged to $713 million last year from $30 million in 2009. In the first quarter of this year alone, revenue topped $644 million.

Most of the recent growth came organically rather than through acquisitions, a second source added, noting that Groupon has not bought many companies lately.

Despite a sizzling pace of growth, some critics remain wary about piling into a business -- essentially a coupon service -- that can be easily replicated both by startups and existing Web powerhouses. Google has already begun such a service.

And while it shares the spotlight trained on social media companies such as Zynga, it needs resources others don't: a huge sales staff to enlist merchants and handle customer service.

Groupon has spent a lot to lure subscribers and generate revenue growth. It shelled out $208 million on marketing alone during the first quarter of this year, up from $4 million in the same period a year earlier.

"The key question is how much money are they spending per new subscriber, and how much revenue are they generating per existing subscriber?" asked David Sinsky of Yipit, which aggregates daily deals and tracks the industry.

"If you assume that revenue per subscriber has held flat and costs for new subscribers were also the same, then profitability may look better."

(Additional reporting by Edwin Chan; Editing by Phil Berlowitz, Bernard Orr)

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