As AOL desperately tries to get its act together and morph from service provider to advertising powerhouse, the attempt to merge $1 billion worth of acquisitions under the Platform A advertising banner led to lackluster sales, according to Time Warner chief Jeff Bewkes.

Ad sales grew only 1 percent in the first quarter, while revenue fell 23 percent compared to the first quarter of 2007, according to Time Warner, AOL's parent company. During that time, AOL saw a 38 percent drop-off in subscriptions.

Bewkes pinned the blame on a failure to quickly merge AOL-owned ad companies like Tacoda, Quigo and Advertising.com.

''We didn't integrate our Platform A acquisitions fast enough,'' Bewkes said in a conference call on Wednesday. ''That created a sales channel conflict.''

Platform A is believed to reach 90 percent of U.S. internet users and AOL has plans to launch dozens of new sites by the end of the year. According to comScore, traffic to AOL websites has grown by about 15 percent.  However, display advertising declined 18 percent while rumors sprung up about possible layoffs at Platform A.