Early briefing 09.18.07: AOL Goes To NY
The chatter continues this morning over AOL's decision to move headquarters to New York. One topic of conversation is the company's decision to group all its advertising assets into something it is calling Platform A, separating them from the AOL of e-mail, instant messaging, and Britney Spears updates.
AOL says the reorganization will help it better focus on its shift from a provider of dial-up Internet access to one focused on online advertising. The move essentially cleaves NY operations from Dulles; or does it? In interviews with various media, AOL execs insisted yesterday that they are still committed to homegrown content while venturing out to the broader Internet for advertising.
Business Week said AOL has realized that it can no longer depend solely on ads placed on AOL's family of sites.
"So, like many Internet companies, AOL is becoming a distributor of advertisements for placement on sites scattered across the Web. 'We realized very early on that there has been a shift in the marketplace away from display advertising on the portal,' says Chairman and Chief Executive Officer Randy Falco. 'There are more and more Web sites out there, and advertisers are looking for more and bigger touchpoints on the Web.'
"Marketers are expected to spend more than $20 billion online this year. Portals such as Google, Yahoo, AOL, and MSN still capture the majority of that revenue, according to a March, 2007, report by eMarketer analyst David Hallerman. Together the portals grabbed 57.4% of the entire online advertising market, with Google accounting for about 25%, Yahoo 18%, and AOL 7.5%.
The WSJ writes (subscription required) that AOL's pursuit of a broader advertising base so far has had "mixed results: AOL recently reported slower-than-expected second-quarter results, and the company said in August that it didn't expect AOL's ad revenue to increase faster than the rest of the online-ad market.
"One of the best performers within AOL has been Advertising.com, and the new strategy is aimed at building on that strength. It comes several months after Time Warner replaced AOL's top management, bringing in Mr. Falco from NBC Universal as CEO.
"Analysts say selling ads through ad networks is a lower-margin business because the seller has to split the revenue with the publisher of the Web site. AOL said it isn't abandoning its consumer focus and will continue to invest to try to boost audiences to its Web properties, which include its email and instant-messaging services, the celebrity news site TMZ.com, the online mapping site MapQuest as well as its sports and news sites.
The focus 'is going to be on both sides. You can't sacrifice one for the other,' " Falco told the Journal.
The NY Times notes that AOL has lagged behind Google, Microsoft and Yahoo in online advertising. It reports that Platform A "will be led by Curtis G. Viebranz, the former chief executive of Tacoda, a company AOL acquired in July for a reported $275 million. Tacoda's expertise is in behavioral advertising, where specific ads are presented to people based on the Web sites they have visited and other personalized factors. Mr. Viebranz will oversee ad sales on AOL's branded Web site and on thousands of publishers' sites across the Internet.
"Michael J. Kelly, president of AOL Media Networks, will leave AOL after Platform A is up and running, the company said. Mr. Kelly, a longtime Time Warner executive who was publisher of Entertainment Weekly magazine in the late 1990s, was brought in to head ad sales at AOL in 2004."
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