AOL's True Believers

Wall Street is down on AOL Time Warner -- and worried about its moguls. Yet deeper in the ranks, a cadre of executives is working hard to bring the troubled colossus to life. Here's how a new cast of players is building the future of the world's biggest media company.

There's something quietly subversive about Belinda Hankins. She doesn't shock with her office decor or her style. She's a conservatively dressed executive in her mid-forties, with a warm smile and soft features. Spend no more than five minutes in her modest office in Dulles, Virginia, and you'll start thinking, How did anyone this nice get into a position of power at AOL Time Warner?

Keep listening, though, and you'll hear ideas that rock the foundation of conventional wisdom in giant media companies -- especially Hankins's. Stop thinking of audiences as passive, she insists. Forget about aiming for perfection and mass appeal before you show anything to the outside world. Most of all, admire your users, even the ones with bad teeth and low incomes. If you take them for granted, you won't have a business. Take them seriously, and you may conquer the world.

Hankins lays out her creed so gently that it takes a few minutes to realize how radical her ideas are. After all, she works for the company behind Jack Welch's book, Madonna's songs, and the Harry Potter movies. This is the largest of all of the global media conglomerates, a brash place where swagger and superstar brands are a way of life. This is AOL Time Warner, where top executives joke that the company's mission is to help people escape the unbearable tedium of everyday life.

These days, of course, the joke is on AOL Time Warner. The empire that Gerald Levin and Steve Case built has become one of Wall Street's favorite whipping boys. The company's stock is reeling, and its financial results are alarming. Analysts scoff at the company's "synergy" story, which once thrilled them, and there are rumbles about a breakup: Warner Music Group (WMG) plus Time Inc. magazines plus AOL adds up to what, exactly? Journalists write with undisguised glee about day-to-day clumsiness within the company. Even the new CEO, Richard Parsons, is on the defensive. "This is a three-to-five-year journey," he cautions reporters.

But look deeper, past the harsh glare being cast on the very top of the company, and you'll find a cast of power players who are doing the hard work of trying to bring this troubled giant to life. They are frontline innovators like Hankins, who runs the chat rooms, message boards, and other community services of the company's AOL Internet service. Such managers are doing the hardest and most essential work at the company: finding ways to combine AOL Time Warner's renowned brands with projects that could create significant new value.

"Community is the DNA of the Internet," Hankins says. "People come to AOL to meet other people. We figured that out early on -- and it was what helped us pull ahead of all of the other Internet services." Now she and her 180 employees are trying to pass along that expertise to other parts of the AOL Time Warner empire. She consults with Warner Bros. movie executives and CNN editors on how to engage their audiences through AOL and the Internet.

Nothing is as easy as the top brass thought it would be back in January 2001, when it created the company. Even the easy stuff is hard: scheduling meetings, briefing the right people, keeping the bureaucracy under control. Despite the headaches, though, some young executives are inching forward. And as they do, they are creating new models for teamwork, new opportunities for growth, and new approaches to digitally driven innovation. Here are four stories of innovation at the front lines of a media colossus.

Music Man

When Kevin Conroy took charge of AOL Music in February 2001, he knew his number-one priority right away: making friends with the top executives at Warner Music Group. For the past three years, the music industry had been a battleground for traditional recording labels and online upstarts such as Napster. The newcomers thumbed their noses at shrink-wrapped, $16.99 CDs. The old guard was horrified -- and in a mood to sue. Betting was that the turmoil would only stop when one side put the other out of business.

Despite his futuristic new job, Conroy's sympathies lay in the middle -- or perhaps even aligned with the traditionalists. He had been a senior executive at Bertelsmann Music Group (BMG) before coming to AOL. Other executives at BMG had championed an investment in Napster. Conroy didn't like that deal. But he did believe that it was possible to get the old guard and the newcomers working together, and he had ideas for making it happen. "From day one, it was important to have a different relationship with Warner than anyone expected," Conroy recalls. Within days of landing the AOL Music job, he flew to Los Angeles and spent a weekend with top WMG executives such as Roger Ames, chatting poolside at their homes.

Conroy ticked off the assets that he could put at Warner's disposal. He had more than 27 million AOL subscribers at the time, many of them avid music fans. He had a wildly popular online radio service, Spinner, that could be used as a launching pad for new talent. His message: "I've got an enormous audience that can get excited about your artists. If we connect our audience to your talent, we'll sell more music. That's fundamentally what you want, and it's what I want to accomplish."

Sensible as that strategy sounded, it would only work if Warner executives could easily tap into AOL's potential. "When I took over, it was utterly impossible to create one promotion that would cut across all of our properties," Conroy recalls. Every time people tried, music executives would spend months in meeting hell. So within weeks after his visit to L.A., Conroy summoned all of his key business managers to New York.

"We're going to create a new team for artist and label relations," he explained in an all-hands meeting. "Each project will have a point person whose job will be to make sure that the whole deal happens smoothly. That way, labels will only need to talk to one person." The approach was Management 101, but it was vital. "At first, all I wanted was to do one thing successfully," Conroy explains. "If we could do that, we would start building a foundation of trust with the labels. If you try to do too much, you don't get anything done right. And in this case, nothing mattered more than simplicity and focus."

Before long, Conroy -- and Warner -- had some successes. When WMG wanted to launch newcomer Michelle Branch, AOL offered free downloads of one of her songs, "All You Wanted," four weeks before it began airing on the radio. More than 70,000 people downloaded the song. And in traditional music stores, her album's best selling week coincided with her maximum exposure on AOL -- before she got radio play.

For bigger-name artists, AOL Music promoted virtual listening parties before their CDs hit the stores. That tactic worked spectacularly well for Jewel, whose picture and sound clips were plastered all over AOL just before the release of her CD This Way last November. AOL Time Warner executives estimate that this online exposure pushed up her first-week sales by at least 30%. And in an in-house video, Jewel herself thanks AOL for making her album a bigger hit.

What's also noteworthy about Conroy is what he isn't doing. He has been strikingly low-key about Napster and all of the subsequent attempts to make the Internet a powerful new way to acquire copyrighted music in digital form. "A lot of people are focused on the wrong things," he explains. "Instead of trying to build businesses around online distribution, it's much easier -- and more productive -- to use the online world as a way to market music in CDs and other physical formats."

By 2004, he says, downloadable music may become a real business. But "it takes time for people to change. There's a disconnect between what we can do and how fast people will want to do it." Yet for all of his low-key talk, Conroy reveals big ambitions: "I want to have a bigger impact on this industry over the next 20 years than MTV has had over the past 20."

Messages That Matter

If there's one statistic that defines the power and the lighter-than-air nature of AOL's business, it's this: Every day, AOL Instant Messenger (AIM) users send about 1.4 billion instant messages. In contrast, all of the long-distance carriers in the country transmit a combined total of barely one billion long-distance phone calls a day.

Do those messages matter? The popular conception is that IM is all fluff, just another way for giggly teens to ask, "Wassup?" and gossip about their friends. Even the basic format of the service cries out, "Don't take me too seriously." AIM has never been dressed up as a Microsoft office-productivity tool, with gray accent colors and requests to provide "business contacts." Open up the AOL service, and you're looking at loud rainbow colors and a chance to start filling out your Buddy List.

But appearances deceive. At AOL's Virginia headquarters, AIM is as crucial to how business gets done as Microsoft Word or Excel. When AOL executives want to schedule a meeting or haggle about the fine points of a deal, they don't use email, the phone, or the fax. They IM one another.

When AOL Time Warner's chief talent scout, Michele James, wants to put her final offer in front of a job candidate, she often uses AIM to get top-level approval for her terms. "We had one case recently where the boss was at the airport, about to take off," she recalls. "We were down to the last few minutes in deciding what we could do to win a candidate. He sent me an IM from his mobile device saying, 'Wheels up in 10 min. Deal?' I sent back, '$200K b w 30,000 options y/n?' He came right back with 'Y,' and we were able to make the hire."

Raul Mujica runs the AIM service, and he is a nonstop evangelist for the power of AIM within the enterprise. "Look at my own Buddy List," he says. On the right-hand edge of his computer monitor is a list of more than 170 people, grouped as "Web Props," "Partners," "IP," and so on. That is his business network; it is how he deals with just about everyone who is important to his job.

Two years ago, people at the old Time Warner might have regarded such a list as bizarre. Now many of them are setting up their own lists in order to cooperate with AOL executives. "As we work with the Time Warner properties," Mujica says, "we tell people there, 'AIM is the easiest way to reach us.' We answer IMs right away. It's more effective than voice mail or email. It's almost the only effective way to reach certain people."

Mujica is hard at work too, developing IM as a tool that can help AOL Time Warner do more business with customers. Currently, there are more than 140 million AIM registrations worldwide. And the very nature of the service makes it viral. Pass along a URL or a joke to a friend, and within a few hours, that message can make its way into thousands of people's lives.

For executives at the Time Warner properties, the chance to create positive word of mouth about a new movie, song, magazine, or book is too exciting to pass up. In January 2002, the company created IM tags that let Alanis Morissette fans send friends a link to a streaming-audio version of a hit song on the singer's new album, Under Rug Swept. That helped spur online listening to the song -- and nudged up sales of the CD.

Of course, even a big push from AIM can't make everything a hit. Late last year, Warner Music launched an unknown 14-year-old singer, Lindsay Pagano, and marketers thought that it would be clever to create a synthetic AIM version of the artist online. That way, her fans could "chat" with LindsayBuddy, even though they were actually interacting with a computer program.

Many teens tried chatting with the ersatz version of Pagano -- but hardly any of them bought her music. Some grumbled that the dialogue didn't sound real. (Ask, "Who's your favorite singer?" and out comes a stiff, 100-word answer that sounds as if it were culled from a press release.) Mostly, though, listeners didn't find her music compelling. Within AOL Time Warner, LindsayBuddy is spoken of as "an interesting experiment."

But Mujica isn't brooding about missteps. He is looking for new ways to turn IM into a business tool. One of his favorite examples involves A Walk to Remember, a movie starring MTV celebrity Mandy Moore that was released last year. That film is not likely to be mistaken for Citizen Kane. Critics called it a formulaic tear-jerker romance -- and those were the kinder reviews. Its big break came when AIM offered users a chance to see a trailer and pictures of Moore ahead of the official release.

That bit of guerrilla marketing helped the movie find its audience with teens who liked Moore and were willing to gamble on the film itself. Eventually, A Walk to Remember brought in more than $40 million at the box office -- a decent showing. And, as Mujica sees it, "We really made a difference."

The Mediator

Some people like orderly meetings. Marshall Cohen prefers noisy ones, with five conversations going on at once. All that commotion may sound messy, but it means that people are really getting to know each other -- and figuring out how to do some real business together.

Cohen is hosting a lot of noisy meetings these days. He's a longtime AOL veteran who now runs a marketing council that stretches across almost 20 business units. Every three weeks or so, the marketing chiefs of AOL, HBO, Time Inc., Turner Broadcasting, Warner Bros., and a dozen other properties all get together and talk about future projects and how to make them into bigger successes.

From the start of the merger, management wanted such cross-departmental planning to happen quickly and smoothly. But it's one thing to ask for that kind of cooperation. It's another to get it. After nearly 18 months of pushing for teamwork, Cohen is an expert on what's really involved. "It takes time to make it work," he explains. "You start with smart people, media and marketing all-stars. Everyone has their objectives and their numbers to look at. After a certain number of meetings, they finally trust one another. They see each other outside the meetings. They invite each other to screenings of new movies. And then real work can get done."

Some big projects can be planned out months in advance, such as this year's release of the next Harry Potter and Lord of the Rings movies. Just about every division will be involved in promoting those films. And for all of the excitement, those are low-risk projects. It's a safe bet that the movies will be big hits and draw on well-established fan bases. Clever cross-divisional marketing may push up revenue even more, but it's unlikely that any initiatives will fail badly.

What's more pertinent to AOL Time Warner's growth hopes -- and a lot tougher to pull off -- are the routine projects. Every month, all sorts of smaller initiatives need a marketing push. So far, marketers are still learning to make those routine projects worthwhile. But Cohen sees some encouraging progress. Last September, Turner Broadcasting executives were devastated when their plans to air a John Lennon tribute unraveled at the last moment. Their on-air date was September 12 -- but the terrorist attacks of the previous day made it suddenly futile to put such a program on the air.

"We regrouped with a lot of marketing on AOL," Cohen recalls. "The program was rescheduled for October. Turner had already used up much of its marketing budget, and it was too late to get more ad pages in magazines. But we did a lot on AOL to let people know that the program was coming. We pulled in as big an audience as it had originally hoped for."

How far should AOL Time Warner push to promote its own products online? Years ago, Time Warner officials thought that they could score big by creating a "walled garden," where their online sites became nonstop promotion vehicles for their own wares. But that didn't work out, and now executives take a warier view. In music, for example, WMG offerings may get as much as one-third of the promotional slots for music available on AOL. That's nearly triple Warner's overall share of the U.S. music market. But it still leaves most of AOL's promotion opportunities available to Sony, Bertelsmann, and other labels.

"In order for the AOL service to be successful," Cohen remarks, "it has to be very member oriented. Our members want information about movies and DVDs. If they're interested in what's on TV, we'll make a strong effort to tell them what's on the Warner Bros. network. But if we don't tell them what's on CBS and NBC as well, they won't feel well served."

The People's Champion

Belinda Hankins managed to get through the first 43 years of her life without knowing a thing about Harry Potter. But in early 2001, she got a call from Warner Bros. executives. They wanted to build a Web site to promote their forthcoming movie about the young wizard, but they weren't sure how to get Web surfers truly engaged. As long as Hankins was in charge of online-community initiatives for AOL, would she mind helping them?

The only possible answer, of course, was, "I'd be glad to." Hankins raced through a CliffsNotes summary of Harry Potter and the Sorcerer's Stone. Then she got to the section where the new students at Hogwarts School of Witchcraft and Wizardry sit under a "sorting hat" that assigns them to different buildings on campus. That's when she and her colleagues had their own "aha" moment.

"We should create our own sorting hat," Hankins and some colleagues decided. The Web site would ask a few questions. What type of spell would you like to cast on yourself? What pet would you bring to school? Visitors could zip through the quiz. At the end, their answers would determine whether they would be assigned to the virtuous Gryffindor house, the sinister Slytherin house, or one of the other houses.

It was a simple feature to add. But its very simplicity was what made it brilliant. When www.harrypotter.warnerbros.com was launched, the sorting hat became the site's most popular feature. The visitors lingered on the site -- and began emailing Warner Bros. about how they could buy Harry Potter gear. The movie was already destined to be a smash, but the Web site helped Warner Bros. benefit even more.

To people brought up in the big-budget, perfectionistic cultures of Time Inc. and Warner Bros., what Hankins does can seem quirky and on the fringe. But it's no accident that AOL has been so successful at connecting with its paying customers. Better than any other company except eBay, AOL understands how to create a dialogue with its users -- and, in many cases, even lets them create the product.

In order to do that properly, you have to be open-minded and nonjudgmental. A while back, one of Hankins's employees noticed that the message board for "tightwads" (yes, they really call themselves "tightwads") was full of postings about "Dumpster diving." Some thrifty folks were pulling things out of Dumpsters and chatting with one another about their finds. Rather than sneer at the habit, the AOL Community team decided to break off Dumpster diving as its own focus area, with full-time message boards and chat groups. Create such affinity groups, Hankins explains, "and all of a sudden you've got 50 friends online who need to stay connected. They aren't going to switch to MSN for their Internet service no matter what. When AOL fills a niche like that, it becomes more than email and access to the Internet. It becomes a need. And we want people to need us."

In her bio, Hankins lists nearly 15 years of experience in marketing at Xerox. She can come across as a capable big-company manager anytime she needs to. But her most interesting credentials aren't on her résumé. Her grandmother was a faith healer. Several of her cousins are nurses. In her spare time, she reads message boards for breast-cancer patients and wonders what she can do to help. If AOL rated its employees on a 1-to-10 scale for empathy, Hankins would score 11.

"We're nothing at all without our members," Hankins says. "We can't be successful if we don't give them what they want. We have to bubble up what's exciting about an area and celebrate it. Spotlight it. Make it more relevant to people."

George Anders (ganders@fastcompany.com) is currently writing a book about the battle over the HP-Compaq merger.

Sidebar: How to Talk AOL

Join any big organization and you'll be confronted with jargon. That's doubly true at AOL. A complete AOL-English dictionary could fill up an issue of Fast Company. Here are a few essential entries, along with some advice about how to work the terms into conversation.

Brothers and sisters: This is the term for all of the non-AOL divisions of AOL Time Warner. Use it liberally, but pay attention to context. It can be a term of affection. ("We're getting some good ideas from our brothers and sisters.") Or, said with a raised eyebrow, it can turn into a way to express exasperation and despair. ("We've spent three months trying to get our brothers and sisters to understand.")

Cliff-hangers: Links on an AOL screen that tempt you to click on them to find out what's next. Well-paid editors spend a lot of time trying to create cliff-hangers to increase AOL page views.

Members: Other companies have customers. AOL has members. In the world of AOL, members are active, they are constantly creating the product, and they are the experts. Almost everywhere else, consumers are passive and valued mostly for their wallets.

Priorities: No one at AOL ever says no. They just say, "We'll have to see how this fits into our priorities." Hear that -- and you've very delicately been told, "Don't ever bother me again with that stupid idea."

SpIMming: Get too much junk email, and you're a victim of spamming. Instant messaging is the main form of communication at AOL. So spamming becomes spIMming. Don't do it.

The one-beat test: Clap your hands twice. The interval between claps is one beat. That's how long you have to command someone's attention on an AOL screen. It means that any message has to be pared down to its bare essentials. If it's complicated, people won't engage.

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