• by April 12, 2004

America Online's ad sales waters are roiling--again.

But this time, it is under the guidance of Michael Kelly, a respected Time Inc. vet who was tapped in January to head AOL's troubled ad sales operation. Kelly was plucked to reshuffle ad sales at AOL after a year helming Time Warner's Global Marketing Solutions unit, the media giant's uber-marketing body that coordinates cross-divisional advertising, promotion, and sponsorship deals.

Kelly came aboard after the abrupt exit of Lisa Brown, an AOL executive vice president who led the ad sales group for a year. Brown's short-lived stint was preceded by two other executives--Bob Sherman and Bob Friedman --both of whom cycled, in quick succession, through the group known as AOL Interactive Marketing.

Kelly began his new gig on February 1 as president of AOL Network Sales and Solutions, a name that reflected an enlarged domain, and pointed to the beginnings of a restructuring for the ad sales unit. In less than three months on the job, the unit's name has changed to AOL Media Networks.

The change appears to be more than an exercise in semantics: Mike Kelly is in the catbird seat, calling the shots and attempting to transform a fragmented sales operation into a traditional media sales organization. "We are building a traditional media company," Kelly said during an interview.

Traditional in the sense that most media sales organizations, such as those of the broadcast networks, place ad sales inventory, sales, and promotion functions under one roof. In creating AOL Media Networks, Kelly says he has set up a one-stop shop for marketers by placing sales, inventory management, planning, integration, and pricing all in one organization. Previously, many of the functions had been spread among disparate groups.

AOL Media Networks is responsible for all non-subscription revenue at AOL, Inc. For example, the organization is now responsible for the ad inventory on the AOL narrowband, broadband, KOL, Red, and AOL Latino services, as well as on the Moviefone, Mapquest, CompuServe, Netscape, AOL Instant Messenger and ICQ, AOL.com, and Netscape.com properties. That's a lot of inventory.

Kelly says he wanted to create a single inventory management organization that would have access to all the inventory at AOL, Inc. and the salespeople who are empowered. Previously, there was no content supporting commerce, and that too has changed.

Kelly and his key lieutenants hope that marketers and their media agencies will soon begin to see a more streamlined and efficient organization emerge. "In the last 60 days we have completely restructured the way AOL, Inc. runs its media business," Kelly said. "What made AOL difficult to deal with was too much shuttling--too many handoffs to fragmented organizations."

In the old organization, AOL Interactive Marketing was limited in scope, consisting of a sales and strategy group. Commerce and search were off on an island, as were pricing, planning, and account services functions. A marketer might have dealt with more than 30 individual groups within AOL. Now, under Kelly's leadership, there are three units within AOL Media Networks that service marketers--ad sales and partnerships, client services, and sales development groups. The number of "handoffs," as Kelly refers to the gauntlet marketers and agencies used to run, is now roughly 3-5.

One of Kelly's AOL Media Networks lieutenants is David Lebow, executive vice president/general manager, who coordinates partner and member-facing traffic and inventory across AOL's properties. Lebow is also responsible for developing media plans and research, marketing and events targeting advertisers, radio network development, AOL.com, and member education. He also oversees AOL's commerce channels.

Michael Barrett, executive vice president, sales and partner marketing, leads agency, partner, and category sales efforts, along with customer relations and sales training. One of his direct reports is Janet Balis, formerly of Time Inc., who is a senior vice president, sales development. Balis is tasked with building inbound and outbound sales strategies and programs to support ad salespeople in the field. Also reporting to Barrett is Diana Dunbar, vice president of account services, who essentially oversees AOL's client services function and field offices in Chicago, Detroit, Dulles, Va., and New York.

Also part of Kelly's team is Brendan Condon, senior vice president, finance and administration, who oversees advertising operations, and Jim Riesenbach, senior vice president, search and directional media, who is responsible for revenues derived from search. Barrett, Condon, and Lebow report to Kelly.

With AOL's emphasis on programmed environments, and its gradual shift to HTML (Kelly says all of the content areas on AOL will be HTML-enabled by year-end), the division will make a big play for content on AOL.com. The AOL.com gateway, formerly a sleepy little outpost for grabbing email while on the road, is now being used as a tool for promoting the company's broadband products and services. The marketing play has already begun: "We're using our own inventory to promote premium offerings," Kelly says.

Another strategy already taking shape is to attract third-party content providers from outside the Time Warner family to program various areas of the service. That has already begun, as AOL announced last week the debut of "The Startup," a Web reality series co-branded and produced with Entrepreneur magazine and Entrepreneur.com. The series will appear on AOL for Small Business, and has attracted advertisers including American Express OPEN: The Small Business Network, Fedex, Entrepreneur.com, GotVMail, and Business Filings.

Not surprisingly, Kelly is bullish. He says business is good, and the proof will come either way on April 28 when Time Warner reports its earnings. "Advertisers are getting results at AOL and elsewhere," he says, referring to the pickup in online advertising.

"A big part of this change (AOL's ad sales reorganization) was to accommodate the rising demand in the online advertising arena, and despite some of the difficulties our old organization presented, AOL's ad businesses and search businesses are growing significantly," Kelly maintains. "With the largest, most loyal audience, AOL should also be the easiest company for marketers to work with. This new way of doing business should help us get back to Number 1."