Digital media buyers are weary of the constant executive and strategic shifts at AOL. But many are surprisingly optimistic that the long-adrift Web portal may finally be taking the proper steps to right itself.
Last week, AOL ousted Platform-A president Lynda Clarizio after just 11 months on the job (which was only six months longer than her predecessor). She was replaced by Yahoo vet Greg Coleman, whose heritage is in traditional brand selling. Then the company revealed a severe revenue decline during parent company Time Warner’s earnings call, causing outrage among some analysts. Pali Research analyst Richard Greenfield issued a missive in which he called for chairman and CEO Randy Falco’ and president/COO Ron Grant’s jobs.
Unfortunately for AOL, the leadership changes and bad news were all too familiar to some buyers. “It feels a little bit like Groundhog Day,” said Amanda Richman, senior vp, director of digital services at MediaVest. Or maybe Back to The Future. “This seems to signal a shift from technology…back to a focus on content and experiences.” Richman is referring to Platform-A’s formation back in 2007. While just a few years ago AOL was touting itself as the home of original entertainment like the Mark Burnett series Gold Rush, Platform-A was delivering a firm statement to the market that AOL would focus on the ad network, performance-based side of the business.
It’s a move the company never should have made, argued David Cohen, executive vp, U.S. director of digital communications at Universal McCann, since that segment was already saturated with imitators all chasing the same direct-response dollars. “The real growth in this industry is in brand marketing. You can’t have your entire sell [be] around spots and dots,” said Cohen.
AOL officials explained that Clarizio had succeeded at integrating the company’s ad network-related acquisitions (Tacoda, Third Screen Media, etc.) and that it’s now time to focus on sales efforts. At least one digital exec buys that argument. “For AOL, 2008 was a year of focusing on their technology to make sure they delivered,” said Carrie Frolich, managing director, digital media MEC Interaction. “They did a great job. It feels like AOL is being proactive with this move, and this is not a backed-in-a-corner move.”
However, Dave Martin, vp, digital media at Ignited, warned that ’09 might be a dangerous year to move far away from D-R in favor of brand dollars. “You have to talk about both, especially in this economy,” he said. “Targeting, network buys—these things are critical. Platform-A needs to be locked and ready.”
Coleman is expected to focus his efforts on landing top brand advertisers, given the recent formation of AOL’s programming-centric group MediaGlow, which has quietly launched 70 new niche sites. According to AOL, MediaGlow sites saw page views soar from 48 billion to 71 billion last year. That would be great news—except it more glaringly highlights AOL’s display-ad declines.
Imran Khan, managing director, J.P. Morgan, cautioned that selling niche content might be tricky in a rough economic climate that favors performance-based campaigns. “Content is a good strategy for AOL,” he said. “But pricing is down, and you have to be very careful with all these content investments. It will be hard to get a return in this environment.”
Still, buyers are willing to be patient—with MediaGlow and AOL. Universal McCann’s Cohen said that MediaGlow properties like WalletPop.com and Asylum.com are “all nascent brands. It’s a little unfair to judge them yet.”
MediaVest’s Richman emphasized that it will be crucial for these sites to deliver more than just extra page views. “They’ve created a lot of mini-brands,” she said. “The jury is still out on how they apply that. Do they allow us to get more depth and experience?”
For his part, Adam Shlachter, digital practice lead at MEC Interaction, said that after attend a recent AOL “road show” sales event, he came away impressed with the company’s renewed commitment to content. “They are launching some properties and not even thinking about ad support [to start]. They’re building loyal audiences and they’re not slowing down.”