AOL announced its first-quarter earnings this morning, and the numbers were a mixed bag. Overall revenue was up, but U.S. display advertising was down 1 percent—not good news in an online ad market that is booming. CEO Tim Armstrong spoke with Adweek about the results.
Adweek: During this morning’s earnings call, one of the things you mentioned regarding AOL’s display shortfall was that your strategy may be “off tune.” Can you elaborate?
Armstrong: Well, you’ve got to remember that in the past year or so we’ve changed all the brands around. We’ve spent a lot of time focused on our brands and setting them up for consumers. We haven’t spent as much time with our B2B strategy. The majority of our ad customers are running their display budgets off of KPIs (key performance measures like brand lift). We need to reconnect brands to KPIs. We’ve sort of needed to shift from an older display model to a newer display model, and that’s something we’re working through.
One thing a lot of people wonder about is Project Devil, your initiative to elevate display advertising by running one high-impact unit on a page instead of tons of banners all over a site. That would seem to be an easy way to boost display. So why don’t we see Devil ads on HuffPo, TechCrunch, all across AOL?
Armstrong: You’re going to get me in trouble because that’s one of my ideas. But our finance people might have to taser me. The truth is, we’ve run 54 Devil campaigns with 39 advertisers. We had 19 advertisers last quarter. We’re scaling fairly substantially. Our customers all want Devil; they’re willing to buy more of it. But the process and people need to change. We’ve changed the way we build our Web pages, but our customers need to change.
That sort of implies that buyers or brands aren’t set up do buy ads this way?
Armstrong: Well, that is why you see us trying to [train] agencies on using Pictela ads. They’re set up to buy other stuff. We’ve got 30-40 customers [who will tell you] they know Devil performs. But in some cases we literally need to set up a CMS system at agencies. All of them want to do it.
What about HuffPo? It was such a hot, fast-growing site when you bought it. It’s only grown in terms of content, profile. Are you getting the ad premiums for that site that you think you deserve?
Armstrong: HuffPo has gone through a lot of changes as well. There are now 67 sections. More video. It’s been growing like crazy. The sell-through is a little bit less than we want. But buyers are catching up.
Regarding video, the industry is coming off several weeks of high-profile NewFronts, including yours, where you introduced a lot of original series, premium content. Do you see a lot of dollars being committed now during the big TV buying season?
Armstrong: We’ve gotten a couple of things done already. We announced a partnership with Unilever. Video is just like Devil. The total will is there. It’s the way you move it. The challenge is agency structure, the metrics. But I think this is going to be a watershed year. There is a will, and a way.