There’s lots of speculation on what the soon-to-be independent AOL should do to drive user and revenue growth, and stay relevant in a world dominated by Google, Microsoft and Facebook. New CEO Tim Armstrong says he’s taking some time to take input internally and create a plan.
But some sources we’ve been talking to say that there’s a real push to remake AOL into an online media powerhouse – one that will rise just as the print media world is falling apart.
There are some real assets. First is that dial up business, which still brings in around $1 billion in free cash a year. The business is deteriorating rapidly, but it will bring in real cash over the next 18-24 months before it peters out. The company also has a social networking base with Bebo and AIM, and integration of those services into other AOL properties and third party sites continues.
But the real opportunity for AOL is to grab marketshare in a relatively open field, say some people close to the company. A contingent of AOL executives are said to be pushing Armstrong to embrace what I’ve heard is called the “Toyota strategy” by building and buying scores of great online media brands. AOL is the “Toyota” and the media brands are like the many car models that Toyota successfully pushes – Highlander, Camry, Pious, etc. The analogy isn’t perfect, but it gives you a good idea of how they’re thinking of organizing things.
The foundation for this strategy is already firmly in place, and has been since AOL acquired Weblogs, Inc. in 2005 for $25 million or so (that was three AOL CEO’s ago, when Jonathan Miller was running things). All those great Weblogs brands have continued to grow at a breakneck pace. Sites like Engadget, TUAW and Joystiq are all great niche brands on their own. And AOL has expanded into many other sub-brands through their MediaGlow division under Bill Wilson.
MediaGlow was unveiled a year ago. These are AOL’s content sites – music, finance, the blogs, and new sites like PoliticsDaily and Love.com. Combined, these sites bring in 76 million unique monthly visitors (Comsore, May 2009). 27 of the Technorati Top 100 blogs are owned by AOL.
The MediaGlow team wants to pick up the pieces of the dying print media business. Advertising is falling off a cliff (billions of dollars in advertising has evaporated). Combined with the high structural costs of print media (high wages, and well, printing on paper and mailing to readers) and the result is a lot of high quality talent is suddenly willing to take a job in online, even at a much lower salary.
The plan would be to build and buy scores of new brands in every monetizable niche possible. If you see a magazine at the newsstand covering a topic, AOL will have their own online brand for that topic, in blog or other format. They’ve already got the publishing platform with MediaGlow. New brands can be inserted or built at little marginal operating cost. And the talent is out there for the taking right now.
That’s where all that cash from the dialup business comes in. They’ve got the runway of 18 – 24 months to buy properties and hire journalists to staff these new brands. And once they get going it’s unlikely any of the other big portals can catch up, particularly if AOL has hired the best talent out there.. Yahoo is the one competitor in a position to do something like this, but there’s been no indication from CEO Carol Bartz that she finds this direction interesting.
I like this strategy – it’s clear and bold. It’s not just following Facebook or Twitter. It’s not entering AOL into the soul-sucking search wars. But building out online content at a massive scale with proven journalists shed from the print world, all backed by dialup cash flow makes a lot of sense. It’s a war that AOL can win. All they have to do is fire the guns.
I think they should go and buy a multitude of strong niche destination pages like popurls or fark and see what works.
1st
Not 1st.
Would be nice to see another company make Google work harder and worry a little here and there. Win-win for all
Positioning yourself for an acquisition offer, Michael?
Blog people want print media to die. I dont really understand why. Agree digital is searchable and etc but there will remain print media, for ever.
So now it ll be aol, yhoo, and msft against goog.
There will always be print media, books, magazines. But just less of them since they are more expensive to print and produce than online media.
I absolutely agree with wannadevelop – commenting above me here – because a little more competition is never a bad idea, especially one that’ll keep Google on it’s feet.
How many of you guys know (well, prior to TC identifying some of them) exactly how many otherwise independent assets that are now owned – even if not operated – and gradually being integrated into sites owned by their parent organisations?
Not sure about win-win, but definitely more interesting choices (at least initially) but with the added advantages of a single point of entry/login, and THAT contributes to being a winner…
hello nice posting.
great article, print is so dead
If they could buy up some media properties that fit well with their current offering (3rd party integration, news services) they could do very well to leverage it.
On that note, with the upcoming MySpace/Google ad deal closing up (upcoming being relative as well), they might be able to get a good deal and pinch some good advertising for their new properties.
Should be interesting.
Thanks for the enthusiastic praise for the Weblogs brands.
“the media brands are like the many car models that Toyota successfully pushes – Highlander, Camry, Pious, etc. ”
I did not know about the Toyota Pious; it sounds like a very upstanding and righteous automobile.
Imagine the karma one gets from driving a Toyota Pious.
(Sorry.)
Finally an interesting strategy based on common sense.
Tim, if you are interested in some free input on the matter you can get my email address from the techcrunch guys.
Because you make a tremendous case why anyone should care, let alone the CEO of a large company…
This is a very smart move. AOL can still be a tremendous brand.
OK, so this sounds like they have addressed the supply side issues (lower cost base, operating efficiencies etc.) but what about the advertiser/demand side. CPM rates are still generally dripping lower – even in niches, CPA/CPC on “low” volume destinations ain’t going to pay a huge amount of rent. So not entirely sure that this strat is going to be a medium-long term win.
I’d also be interested in AOL’s stance on this
if they really wanted to do this, they should have stuck to timewarner which produces great content.
i think these guys are stuck. they are so dependent on google for that revenue and they are going to realize in a year or two when the deal is up for renewal that they don’t have an alternate revenue stream in place and no the advertisement.com/ platform a can’t make up for it
AOL should buy Olive Software for their Active Pages application… to me one of the best on-line presentation mediums of previous print media.
The best bet would be to promote their own stores and not depend on ad revenues. I still coudn’t understand why facebook has not developed and promoted a store.
Forget about advertising, that is not how they are going to make most of the money. No publisher will survive if their advertising revenues are more than 20% of the total at most.
Subscriptions, commissions and other type of branding partnerships are the models that will develop.
Good strategy….wrong company.
AOL always thinks in terms of what they can foist on their customers rather than what their customers want. Thus they wander off in this direction and that direction aimlessly.
this stategy does not organize anything.
heres and example: http://www.dema...dia.com/brands/
the more niche channels you add the more you look like a yardsale.
a strategic multichannel “natual language” niche platform makes more sense.
StrategyLocator.com – know where your going
This all sounds great – but it hinges on one central assumption: the problem with print is print. Maybe this is true, but it’s far from a certainty – there are other factors at play here – factors that are apparent in both print and online content businesses. Building a business on display revenue – a business you want to sustain – may be a fool’s errand. Without a doubt the Arrington plan will get AOL a few good years – maybe even a decade – maybe even long enough to see Arrington land safely with a big acquisition parachute – but the jury is out on whether taking the magazine model to the web is a smart play. If we assume it is, why wouldn’t established brands like Time Inc just go there? The web is not rocket science – if there was any “there” there I would think that the established media brands like Time Inc – the brands with a century of experience and established relationships with big money advertisers – wouldn’t be sweating bullets over the future of the biz.
OK Mike..it’s clear and its bold…and its funded by ???
AD revenue.
Content delivery funded by advertising instead of subscription. Clear yes, bold…nah…
Michael,
I realize that print has begun to fail as a medium. But do you know what publications (newspapers and magazines) have failed?
Has someone made a list?
Time Warner dumping AOL. I don’t see AOL making it on its own. Wait and see!
Great move for AOL and Tim Armstrong.
As for bloggers wanting print media dead: Most blogs I see take most of their images from print media sites. What will happen to those blogs when they have to cough up $10,000 for one fashion/product/celebrity/paparazzi photo? AOL has the cash to own all these niche content areas. They just have to suck less. Let’s see if they can do it.
“Most blogs I see take most of their images from print media sites.”
You’re either reading only reading Blogspot blogs, or are sorely mistaken.
Sounds like an interesting move; perhaps they should/could also buy FrameChannel (distribution to WiFi digital photo frames) and something that works like Whispernet (to Kindles, PCs, tablets) so they have alternative distribution methods lined up.