AOL Time Warner On a Rampage

by , May 1, 2001, 12:00 AM
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The new 800-pound gorilla of the online jungle starts throwing its weight around with cross-media deals.

The time: fourth quarter, 2000. The place: CNN offices in New York. The participants: executives from AOL Time Warner, some of its properties, two advertising agencies, and Nortel Networks, an AOLTW advertiser considering a larger buy for 2001.

Joe Kyriakoza was in the room. A group account director at Beyond Interactive, a division of Grey Advertising that is Nortel’s online agency, he attended the meeting on behalf of his client. Nortel had been buying television advertising on CNN TechWatch and some online advertising on CNN.com, but “they were looking for an Internet solution,” Kyriakoza says, and decided to increase their online buy.

Representatives from Temerlin McClain, Nortel’s offline agency, were at the meeting too, to renew the TV buy, Kyriakoza says. Nortel expanded its online buy by becoming the exclusive sponsor of the TechWatch segment of CNNfn.com. “We were able to secure better placements, larger units like skyscrapers, and better positioning,” he says.

The meeting, one of many held between AOLTW and its advertisers recently, is representative of the new wave in advertising with the company. Cross-media promotions are hot this year, representative of the way clients are expanding their buys across multimedia platforms to secure a broader reach for their message.

AOLTW generated $1.44 billion in advertising revenue last year, according to Competitive Media Reporting, but that number could grow because of the cross-media deals, despite the soft economy. AOLTW has announced cross-media deals this year with the following advertisers: Nortel, P&O Princess Cruises, Kinko’s, Cendant Corp., Compaq Computer Corp., Continental Airlines, Foundry Networks, and PurchasePro.

The deals aren’t just an increase in expenditures for the advertisers. They are a new way of buying advertising that unites many parties as the advertisers expand their deals. The Nortel deal brought an online and offline agency together to negotiate the buy, which Kyriakoza sees as a real benefit for online advertising. “If a traditional agency goes in and negotiates a deal, we on the online side are forced to say OK. Without us being there and taking the integrated approach, we have to settle for what’s given to us.” But with Beyond Interactive at the meeting, the deal changed. “We said we wanted the tech section, larger ad units, and wireless. Without us there, we wouldn’t have gotten it,” he says. “We were able to come up with a plan for the client that involved all platforms.”

AOL wasn’t involved in the deal, although Kyriakoza says AOL representatives were at the meeting too. The meeting took place before the AOLTW merger was secured in early January, which may explain why Nortel didn’t make an AOL buy. But AOL is now at the forefront of many AOLTW cross-media buys, with many of the advertisers starting with AOL before they buy other company properties.

Continental Airlines had been a premiere partner in AOL’s travel channel since 1997. “After the AOLTW merger, we wanted to leverage our existing partnership into new properties,” says Kevin McKenna, Continental’s managing director of electronic marketing. The company upgraded its AOL sponsorship and bought print advertising in On, a new Time Warner magazine about the Internet. The company will advertise in the travel channels of several AOL brands, including AOL, Compuserve, Netscape.com, and AOL Digital City. There will also be advertising in AOL wireless products, which will soon be introduced. The advertising in On starts in October with a 12-page unit in a special AOL users guide. Another unit in a 2002 issue is planned, McKenna says.

The advertising in On is the first magazine buy for Continental, which has no background with Time Warner. “The extension into their properties is new this year,” McKenna says.

Novo, Continental’s advertising agency, assisted with the deal, although McKenna says, “we have a relationship with AOL that dates back to 1997, so we were the lead.” Megan O’Connor, vice president of e-marketing services at Novo, says, “They had a deal with AOL and were renewing it. We advised them to renew the deal and helped them figure out what to pay and where the impressions should be going.”

Their comments are interesting when trying to determine how AOLTW cross-media deals are actually made. “In the past, they went directly to clients, but now they’re more willing to talk and work with agencies,” says Jeff Marshall, director of operations at Starcom Worldwide, the media buying division of Bcom3 in Chicago. In the past, agencies “didn’t have online and offline capabilities, which presented a problem of coordination,” he says. “But more and more today, you see organizations like us with both sides covered. We’re configured to find the best deals across media properties.”

He says AOLTW now uses a combination of upper management and property-specific reps to sell the packages.

An advertising consultant in New York, who requested anonymity, says that AOLTW has begun to “sell from the top,” meaning deals are directed by corporate executives instead of those at the individual properties. “The direction for cross-platform selling hadn’t come that way, but that’s the way Pittman wants to sell,” the consultant says, referring to Bob Pittman, AOLTW’s co-COO. “There will be no territorial disputes about setting prices for individual pieces and profit goals that messes things up.”

It’s been said that AOLTW has set up a new unit to sell cross-media packages, with one observer calling it, “the Alliance.” But a spokesman at AOLTW denied such a unit exists. “Every deal is different,” he said, when asked how AOLTW signs cross-media deals. The company would provide no further information on how it sells cross-media packages.

AOL also initiated the deal with Los Angeles based P&O Princess Cruises. An AOL business development team sold it, according to Todd Putman, Princess’s vice president of marketing. Initiative Media, Princess’s media buyer, and its ad agency, Suissa Miller, were also involved. “They bought it for us, but we recommended the buy,” he says.

Princess was an AOL advertiser that had bought Southern Living, a magazine, and CNN TV in 1999, but had not done any offline advertising with AOLTW in 2000, Putman says. “We had a strong relationship with AOL, and after the merger, they presented us with a package,” he says. It includes expanded advertising on AOL as well as television advertising on CNN and Headline News that will launch this spring. The TV advertising will continue into the fall.

Princess’s advertising on AOL demonstrates the reach of the property. Not all of the advertising occurs on AOL. In February, Princess did a sweepstakes promotion with Monster.com, giving away a dream job as a cruise director on a trip to the Caribbean. “Without our relationship with AOL, we wouldn’t get those opportunities,” Putman says. “AOL has a relationship with Monster.com, and they offered that relationship to us.”

While AOLTW cross-media packages have been bought by a variety of consumer-oriented companies, PurchasePro, a Las Vegas firm that provides e-commerce solutions to the business-to-business marketplace, also bought one. The company had been advertising on AOL. In the cross-media deal it announced in January, PurchasePro said it will advertise in Fortune and eCompany Now magazines as well as on CNN TV. The deal represents the company’s “first multimillion-dollar offline advertising campaign,” it said in a press release.

The strength of AOL is perhaps the most compelling element of AOLTW cross-media packages. “It makes them different,” says Jack Myers, president of the Myers Reports, distinguishing between AOLTW and its major cross-media competitors, Viacom Plus, the Walt Disney Co., ESPN/ABC and others. The other companies lack the strong online tie-in, which is “a huge asset that gives real value to the marketer,” Myers says. “You develop something with an interactive element and drive the audience, who is already on AOL.”

If AOLTW has a shortcoming, it is the absence of network TV. “It has no major TV presence and doesn’t have the TV presence of the other conglomerates,” like Viacom, which has CBS, says one industry expert. AOLTW does own major cable TV properties, including Turner Broadcasting System, which owns TBS, TNT, Turner Classic Movies, the CNN News Group, and the Cartoon Network. Then there is Home Box Office, which owns HBO, Cinemax, and Comedy Central, a joint venture. It also owns The WB Television Network. Turner has been behind some of the cross-media deals, working with advertisers who started with Turner and getting them to buy additional AOLTW properties.

If there is another shortcoming, it’s a reputation for the way the company sells. It is “not setting the standard for customer service,” according to Rudy Grahn, an analyst at Jupiter Media Metrix. He calls AOL “dreadful” and “unmanageable,” claiming customers don’t even know the price of the advertising they buy. “You may buy impressions across different channels and you won’t be told what they cost in each channel. It’s impossible to calculate your CPM click if you don’t know what you pay for media.” Grahn also says AOL only guarantees the delivery of impressions on a quarterly or annual basis, which means they aren’t delivered evenly. “It makes it very difficult to manage data and reporting, you have to do an incredible amount of sleuthing.”

Since AOLTW was unwilling to answer questions about its sales practices, it couldn’t respond to these allegations, but it is obvious those practices will have to change if the company hopes to satisfy its cross-media advertisers.

“From a media-buyer’s perspective, we have high expectations for detail and accountability for what we’re buying,” says Adam Gerber, director of media strategies at The Digital Edge, a media-buying service affiliated with Young & Rubicam. “There’s a multimillion-dollar commitment, and we expect to see results and accountability for the money we spend. AOL up to now has not been willing to deliver that kind of detail,” he says. But the new cross-media deals may be improving things, because “they are slowly making progress and working to meet the expectations of media buyers,” he claims.

Meanwhile, media-buying firms might have to change, too. Allen Banks, an executive vice-president at Saatchi & Saatchi in New York, says media buyers are challenged by cross-media deals because they are fragmented and used to focusing on one area of communications. “They need someone who understands all the parts to make these buys happen,” he says. He notes that Interpublic, a media-buying firm, has set up a separate division to handle cross-media promotions. That may be the way media buyers go in their efforts to handle the new wave of cross-media deals that are transforming the way major advertisers buy.

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