NEW YORK (CNN/Money) - AOL Time Warner Inc. executives said Tuesday they now see an unexpected sharp drop in profits from the company's America Online unit next year, due to an even sharper drop in advertising and online commerce revenue.

During a lengthy meeting with analysts and investors, they also unveiled turnaround plans for the troubled unit that include a push to increase its broadband subscriber base, exclusive content offerings and streamlined advertising sales. These efforts, the executives said, should return AOL to growth by 2004.

The turnaround plans and growth projections, as well as reaffirmation of 2002 financial guidance, weren't enough to assure investors, though. Shares of AOL Time Warner (AOL: Research, Estimates), which also owns CNN/Money, lost $2.36, or 14 percent, in heavy trading Tuesday to close at $14.21. The new financial guidance only detailed results at the AOL unit, not the company's other divisions.

The plans unveiled by AOL executives include making a greater push to keep AOL customers, who are moving to high-speed Internet services known as "broadband," through a new emphasis on AOL's own broadband offerings. New AOL unit CEO Jonathan Miller said only a small fraction of AOL customers are even aware of its high-speed offerings, including a product known as "Bring Your Own Access" or BYOA, which allows users of other high-speed Internet services to remain AOL customers for $14.95 a month.

CNNfn's Greg Clarkin reports on AOL's challenges and turnaround plans. Play video (QuickTime, Real or Windows Media)

"It's amazing we have 4 million people who access us over broadband, because we make it difficult to access us over broadband," Miller said in announcing the new push for high-speed service.

Don Logan, chairman of the AOL Time Warner media and communications group, and Miller said they're confident that dialup service, known as "narrowband," that is used by the majority of AOL customers, is not doomed by the growth in high-speed access to the Internet in the foreseeable future. And they believe they can get more money from both narrowband and broadband subscribers to AOL by offering premium services such as voicemail.

"The narrowband business is a highly profitable business, and it's going to continue to be so for a long time to come," said Logan.

While the executives said they will work hard to migrate AOL customers to broadband, they did not announce any new deals with cable operators or phone companies that provide high-speed Internet service using cable or DSL modems. The executives said in the past they made too much emphasis on these types of connectivity agreements and thus missed the first wave of conversion to broadband service by Internet users.

"We want a national footprint right away, which is the reasons for BYOA," said Miller. "We also want to work closely with cable and DSL providers. Co-marketing is effective."

The world's largest online service provider also intends to hold onto subscribers through improved, sometimes exclusive content, often from other units of AOL Time Warner such as Time Inc. magazines People, Entertainment Weekly and InStyle. It will also offer video clips from CNN which are now available for $4.95 a month.

But even as AOL executives were talking about answering their customers' complaints and showing the new content and services they would be offering to a select group of investors, analysts and media gathered in New York, they were blocking out people watching the presentation over the Internet from the videos and demonstrations. AOL Time Warner spokeswoman Mia Carbonell said the blocking was unfortunate but due to copyright and competitive issues of the presentation.

To stem the loss of advertising revenue, AOL plans to simplify its sales effort and pricing structure. Miller said that the company would try to repair relations with advertising agencies damaged when the company negotiated directly with advertisers in the past rather than going through the agencies.

Miller said he believes that online advertising is poised for better growth than the overall ad market, with an estimated 19 percent annual growth in online ad spending through 2005. The AOL executives said that they believe the market for advertising is already showing signs of improvement and that next year's revenue decline is due to the ending of $500 million in long-term advertising deals negotiated before the burst of the Internet bubble hit the ad market.

"If you net out the impact [of the end of long-term ad deals], 2003 will be, on an operating basis, an up year," said AOL Time Warner Chairman Steve Case. "We don't want to make light of disappointing numbers. But as to the question of has AOL bottomed out yet as a business, we think the answer is yes."

The company will also make a new push in online commerce. It will move away from current efforts, which often entail selling items through "pop-up" windows. It will instead offer new services such as music downloads for 99 cents a song and checking for computer viruses. It announced a deal Tuesday with McAfee to offer online anti-virus services to AOL members.

The company executives said they also hope to handle more online purchases by their subscribers rather than simply getting commissions for referring customers to other online retailers. One plan is to offer discounts only to AOL customers as another way to keep customers who would otherwise be tempted to leave AOL as they upgrade to high-speed service.

Logan and Miller discounted speculation that the company would try to sell the AOL unit, saying there are no discussions or plans along those lines.

"You're seeing America Online and other AOL Time Warner divisions really working together now," said Miller. "You saw the starting point today."

Still, even with its new revenue pushes, AOL said it now expects a 40 to 50 percent decline in advertising and commerce sales in 2003 from its anticipated $1.5 billion to $1.6 billion in such revenue this year. This decline will offset growth in worldwide subscription revenue, leaving overall revenue for the AOL division flat in 2003 compared with 2002. Some had estimated that advertising and commerce revenue would decline only by about a third.

The company anticipates earnings before interest, taxes, depreciation and amortization (EBITDA) to decrease 15 to 25 percent in 2003 from the nearly $1.8 billion it expects to produce this year because of the revenue decline. EBITDA from the AOL unit had been expected to be flat to slightly lower.

Logan told analysts that he believes the turnaround plans for the company will allow it to resume better than 10 percent annual growth in EBITDA at the AOL unit starting in 2004, after the business is stabilized next year.

The company did not announce any recently rumored job cut plans, but the executives didn't rule that out, either, saying there would be a new emphasis on cost controls that would yield more than $100 million in annual savings.

"Like many fast-growing companies, we went through a period where cost management was not a priority. That ends now," Miller said.

Miller suggested that AOL may look at moving its lower-cost dialup service, Compuserve, into the AOL brand, as a way of hanging onto AOL subscribers looking to leave for a lower-priced, no-frills service, but said no decision on that has been made.