Can Tim Armstrong Revive AOL's Ad Biz?
Time Warner cut AOL loose Wednesday. After a decade, the Internet pioneer once again stands on its own Thursday, trading on the New York Stock Exchange under the symbol AOL. It steps out alone into a competitive landscape against Internet companies Google, Microsoft and Yahoo.
AOL CEO Tim Armstrong wants to control display advertising similar to the way Google controls search. He told Julia Boorstin on CNBC's Squawk on the Street that "people are enthralled by search," and that nearly every sentence associated with advertising has ended in the word 'search.'
Armstrong says the reality is that the next $50 billion to $100 billion that will move into the online space will come from brands and brand advertising. More traditional companies have begun to take Internet advertising seriously. And that's the benefit for AOL.
The business strategy has been the biggest concern coming from investors. They look at AOL as a big business that has been in slow decline. Armstrong wants them to see the "newer business" -- the one that will overtake the declining business. So he plans to immediately show people how the brand will change. "And as I say internally, all the time is we live in the 'Show Me State.' Now, show me the metrics, show me the changes, show me the great products and services," he says.
Parting ways with Time Warner could allow AOL to return to its roots as a technology and media company, instead of just another media business unit in the Time Warner universe, according to Mark Simon, Didit vice president of industry relations.
"For a long time, AOL has looked to maximize ads in front of eyeballs," Simon says. "Think of their e-mail strategy. There were lots of things they overlooked in the ways technology could have made their advertising and content work smarter -- something that would have made them more enticing for users, and ultimately, advertisers."
Simon believes Tim Armstrong seems to be bringing the company back to that earlier moment when AOL was a "mover-and-shaker" in the technology space.
But Simon points to technical questions and challenges ahead for AOL. For example: Are there plans to differentiate generic interest from interest aimed toward some kind of purchase intent if AOL goes forward with the plan to create content around search activity and overall Web activity?
Bizarre and humorous articles are a great example, Simon says. "They attract huge amounts of readership and search activity, but often do little to drive sales for any particular product," he says. "The high numbers of page views could create a great branding and engagement opportunity for some advertisers, but less of an opportunity to drive immediate sales."
If AOL heads toward a more heavily automated and dynamic ad sales process, they will need to create rules for many different types of advertising opportunities offered. And while Simon is sure AOL has thought of this, he calls it a serious detail that needs to be addressed from the start.
When it comes to search, AOL has a long way to go. Experian Hitwise released numbers Wednesday revealing that Google accounts for 71.57% of all U.S. searches conducted in the four weeks ending Nov. 28, 2009. Yahoo Search, Bing and Ask.com received 15.39%, 9.34% and 2.65%, respectively. The remaining 52 search engines in the Hitwise Search Engine Analysis Tool accounted for 1.07% of U.S. searches.
To sell advertising, marketers want the engine to hold critical mass.