Change is brewing at AOL. The online and media company, prepping for an end-of-year spin-off from parent Time Warner, is slowly putting together the pieces to prove it can stay competitive.
Its first step? Putting its house in order. This includes hiring Google veterans — like CEO Tim Armstrong, President of Global Advertising Strategy Jeff Levick, and Senior VP of Global Advertising Shashi Seth — as well as President of Internet and Mobile Communications Brad Garlinghouse, a former Yahoo! executive.
Its strategy? Content. “Content really is the future of what is going to drive AOL,” Armstrong recently told attendees at the Mixx online-advertising conference in New York. He went on to say that after a decade that was all about “access,” and another decade about “platforms,” the Internet is now approaching a new era: One that centers on content. "Investment in ad systems and platforms over the past 10 years has been tremendous,” Armstrong tells MediaWeek. “We're betting on the fact that the content that flows through the platform is really important."
AOL is beefing up its content division — which includes outfits like TMZ, Engadget and AOL Music — to attract more users and advertisers. And instead of focusing on lower-priced ads through advertising networks, the company will focus on selling more premium-priced ads on its pages, in partnership with big brands and their media agencies, says a Reuters report.
For example, AOL recently announced a partnership with IKEA’s media agency Mediaedge:cia, to create and launch an IKEA microsite that builds on the content provided within three product areas — bedrooms, living rooms and kitchens. The goal is to engage users more deeply, and to drive traffic to both IKEA.com and IKEA stores.
AOL also plans to explore both “paid” and “free” models, as part of its strategy. "Content will have to be good enough to charge for and it must deliver exceptional value,” Armstrong tells MediaWeek. “We will potentially have content on certain areas of the Internet or on paid-for devices." These areas will likely include sites for underserved audiences like young males or niche music fans. AOL has pursued similar opportunities in the past, and wants to dominate this unexplored “white space,” Armstrong tells MediaWeek.
Its future? Some analysts, however, are unsure of AOL’s “premium advertising” game plan. Colin Gillis, analyst at technology research firm Brigantine Advisors, says ad prices in the market are more likely to fall than rise. "The reality is the pricing of premium display ads are going to level out," Gillis tells Reuters, adding that prices must fall for sites like AOL and Yahoo! to win more ad dollars from traditional media. "The game is to serve ads to audiences, not pages."
Likewise, some advertisers think AOL is already too far behind the competition. "Yahoo's a safe bet for advertisers because it has such a massive audience," says Tom Bedecarre, CEO of digital marketing agency AKQA, in a Wall Street Journal interview.
Currently, Web analytics firm Compete ranks AOL at 13th place, with 55.5 million unique visitors as of August. Meanwhile, top ranker Google has 148.7 million visitors, while Yahoo! sits at second place with 139.7 million.
Clarifying its identity and putting its house in order is a start, but more work is obviously needed. “[AOL] needs a clear strategy and heightened focus on customer service to make it easy to do business with and give agencies a viable alternative to Microsoft, Yahoo! and Google,” writes MediaWeek editor Steve Barrett. “Armstrong is clearly a smart operator and single-minded in his approach, but he has a tough challenge on his hands to restore AOL's mojo in such a fast-moving, dynamic and demanding media space.”
Can AOL make it? One thing is clear, for now: Like its recognizable Running Man icon (which was recently inducted into Madison Avenue’s Advertising Walk of Fame) AOL seems intent on running a serious uphill race.
