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Obligatory Bio Since being named AOL’s chief executive in April, former Googler Tim Armstrong has hit 16 cities in 10 countries on a whirlwind tour of AOL’s operations, taking notes, shaking hands and, most importantly, determining what AOL actually is. By year’s end, Armstrong is hoping to have the company prepared to spinoff from Time Warner in an IPO, a tall order for any executive in such a short span of time.
AOL’s Business Model Armstrong says AOL will focus on five key areas: content, advertising, local communities and mapping, communications, and a new segment he’s creating called AOL Ventures. As for the first two objectives, Armstrong sees AOL’s current ad strategy as being poorly timed. As the economic downturn hit, AOL was sitting on too much generic ad inventory that was unappealing to brand advertisers. The fix: a niche content approach that will appeal to targeted marketers. AOL has already begun this transition through several of its MediaGlow sites, including Endgadget and TMZ.com. Armstrong sees more sites like these in AOL’s future. Whether or not AOL’s Platform-A ad selling system will survive to sell that ad space to marketers is still up in the air.
Soundbite: “We are both buying content and producing content today,” Armstrong says. “The question is how does this company become great at scaling that content and providing value to advertisers?”
What is AOL Ventures? AOL Ventures will be a holding pen for parts of the company that aren’t really working yet. Armstrong envisions AOL Ventures as a jumping off point for connecting with “the innovation community across the globe.” AOL will use the segment to make small acquisitions, to accept investments for projects AOL already has running, and to make investments of its own into start-ups it wishes to support.
Sounds good, but mostly AOL Ventures will be a place to keep those businesses that were never properly integrated into the larger company. Like Bebo, the social networking site that AOL acquired for $580 million that has thus far gone nowhere. “I think the Bebo team in general could benefit from being in an environment where they can purely focus on Bebo and growing Bebo” Armstrong says.
Soundbite: “We’re trying to give them kind of a corral where they can live and grow and really act like a start-up without being constrained to the larger strategy the company has,” Armstrong says.
The Future of TMZ.com A rift formed between AOL and gossip site TMZ.com when the latter decided it would take over its own ad-sales duties. Armstrong, however, feels like this should be viewed as a positive–if, that is, TMZ can do better. “If the value of TMZ increases, it’s a really good thing for us,” Armstrong said, noting that TMZ has a television property as well as an online property, and it’s easier for them to sell their own integrated packages, as AOL has a weak foothold in television. Besides, AOL has bigger fish to fry with its Popeater property.
Soundbite: “We have a substantial property in Popeater that’s maybe twice the size of TMZ from a traffic perspective so we are very focused on monetizing Popeater and the entertainment properties,” Armstrong says.
Rehabilitating the AOL Brand Poor brand perception has plagued AOL for several years now, since the dial-up subscriber service struggled to keep pace in the era of high-speed Internet and search ad dominance. But fragmentation can work to AOL’s advantage on the Web, Armstrong says. It’s all part of his niche strategy: Develop the core business (AOL’s subscriber service still brings in attractive revenues) while keeping its name off of other brands where the AOL logo might be a turn-off.
AOL isn’t shedding its identity: “We have people who pay to use our products and services, and they are heavily engaged in our content,” Armstrong says. “If you erase the brand perceptions of AOL, and consider that people pay to use our properties, you would probably consider this one of the most valuable audiences on the Internet.”
Soundbite: “There are major chain restaurants that make a lot of money; there’s other places that are niche establishments that serve a specific clientele and that’s one way to think about how we’re serving our consumers,” Armstrong says.
The Next 100 Days Armstrong wants to see AOL become the largest distributor of display ads on the Web, as well as one of the world’s largest providers of digital content. The company will focus strongly on localized content, Armstrong says, and will try to catch Google Maps by improving its MapQuest service. Perhaps most importantly, expect to see the user experience improve on AOL properties. For instance, some MapQuest pages previously had up to 17 ads on them. The company removed 10 ads and created better premium space for fewer advertisers. Revenue changed negligibly, but the user experience and advertising value improved. For Armstrong, those kinds of tweaks are key to turning AOL around: “The opportunity is to get out from under the negative history and figure out the value AOL offers for consumers and for publishers and advertisers.”