The world's largest media and internet company, AOL Tme Warner, warned last night that the cost of covering the World Trade Centre disaster would hit earnings from CNN television and Time magazine.

AOL said that the advertising market had "further deteriorated", fuelling fears about the impact on the rest of the industry. In a statement, the chairman, Steve Case, said the events of September 11 "tested our country" and had "created new challenges for all of us".

The group expects its 2001 revenue to grow by 3% to 7% rather than the 8% to 10% previously forecast. Earnings are likely to be up 20% on last year's $8.4bn (£5.7bn).

CNN attracted 3.6m viewers in the days following the disaster, a huge increase on its usual 323,000. The network spared little expense in its coverage, axeing all commercial breaks and deploying eight staff to Afghanistan.

There were similar increase in news-gathering costs at the group's other businesses, including Time, television network NY1 and Time Warner cable.

Concern is growing that advertising revenue has fallen dramatically since the tragedy. Figures from Jupiter Media Metrix, a US market research firm, suggest that the number of new advertisements bought on the web fell by a quarter in the week of the attacks, and were down 16% last week.

The sudden collapse could put fresh pressure on dot.com finances. It will raise new questions about the business model of firms such as Yahoo!, which gets 90% of its revenue from website advertisers. Reports said some websites are cutting advertising prices by up to 80%.