The days of the Web portal are long gone. Everyone knows this, especially the people who run the largest destination sites on the Web. AOL’s newest CEO, Tim Armstrong, acknowledges this fact. “We think the Web will fragment in the future,” he tells me. “I think you have to be agnostic about where your content goes. If they want to get it on Twitter, you should let them get it on Twitter. If they want to get it on your destination site, then let them do that.”
Last week marked the first 100 days since Armstrong left Google to take over as CEO of AOL
. He’s spent most of that time trying “to figure out what the company does today, what it is strong at, and what it is not strong at.” After digesting all of that information, he is now zeroing in on five areas where he thinks AOL can excel at (and social networking is not one of them, thankfully). The five areas of focus are:
- Content
- Advertising
- Local and Mapping
- Communications
- AOL Ventures
When he talks about the first two, he talks about “scaled content” and “scaled advertising,” yet he is very much pursuing a niche content strategy married to a highly targeted, brand advertising approach. AOL is already going down this path with its collection of MediaGlow sites (which include, Engadget, TMZ, and Love.com). We’ve called this the “Toyota strategy” because it consists of creating standalone online media properties which appeal to niche audiences much like magazines used to do in the world of print media.
Which is not to say that Armstrong is chucking the AOL brand out the window. He is just being selective about where he uses it. “My guess is that there are places where the AOL brand will be very helpful,” he says: “A good housekeeping seal of approval. In other places, you don’t want it because it means something different.”
On the advertising front, he thinks AOL jumped into the ad network game at the wrong time right as the economic downturn hit. AOL was left with too much generic ad inventory and not enough inventory appealing to brand advertisers. (Hence, the niche content/magazine-like approach).
Another market he is bullish on is localized content and mapping. AOL owns Mapquest, which needs to be reinvigorated. It also just bought local news site Patch and local events listings site Going. (Armstrong was a shareholder in Patch, but didn’t accept any profits from the transaction beyond his initial investment). Local content remains a huge opportunity on the Web.
I asked Armstrong how he feels about the center of attention on the Web moving away from destination sites to personalized streams of data such as what you find on Twitter and Facebook. “Real-time messaging feeds have a wide spectrum of usage,” he replied. “In some places speed is more important than depth. In others, depth is more important than speed.” He is pretty much agnostic about where people find AOL content, as long as they return to AOL to read it (and maybe click on an ad or two while they are there).
At the same time, AOL is trying to leverage AIM to get into the lifestreaming game. Communications (email, IM, SMS) is one of AOL’s core areas Armstrong wants to strengthen. And to the extent that he can combine personal communications with public streams, he can play there as well.
Content, advertising, and communications are the areas where he feels AOL can play to its strengths. When I asked about search and search advertising, he responded, “Search has taken up a lot of oxygen in that space and rightly so, it has performed well for advertisers and funded a lot of other things.” But he thinks display brand advertising is poised for a comeback once we come out of the economic downturn. “There are a bunch of large players kicking the search ball,” he adds. “We probably don’t consider ourselves in that quadrant.”
Finally, Armstrong set up AOL Ventures as a place to invest in early-stage startups, as well as to park businesses which need fixing or outside investment, Bebo being a case in point. It’s been shunted to AOL Ventures. Armstrong is clearly distancing himself from the $850 million Bebo debacle. He describes one of the imperatives for AOL Ventures as “to keep things on track that have not been on track.” On the M&A front, he says AOL will continue to make “smaller acquisitions” to pick up key technology, engineering talent, unique content, or more advertising scale. “Will we do acquisitions the size of Bebo? My plan is No.”
Armstrong is getting AOL ready to be spun off from Time Warner in an IPO. As part of that transaction, the original thinking was that AOL’s legacy dial-up business wouldn’t be a part of that, but Armstrong has changed his mind. It is not only the roughly $1 billion in annual subscription revenues AOL still generates from the dial-up business that convinced him to keep it. That is quickly declining. But just as important is the traffic and distribution which comes from those locked-in customers. “If you were going to try to recreate the access traffic it would be very expensive to recreate,” notes Armstrong. (ComScore estimates that about 19 million of AOL’s 106 million unique U.S. visitors a month still come from AOL’s client app). When you are trying to build an advertising business, every eyeball counts.
Hah, I believe you switched up “AOL” and “prepares” in the title, Erick. =D
Oh, nevermind — lol.
Fixed, thanks. That was a remnant from another title I was going to go with.
Great post Erick. This man indeed seems to have remarkable ideas. He has gauged the situation well and knows the way in which AOL is to progress in future.
Now, tell me what is your idea of this Fragmenting web? If we go for a fragmenting web, what will be state of portals? Will portals be dead in the future?
all very important questions for people who run cellphone accessory sites. good luck!
The destination page is dead, long live the stream
all about dem aim users
I thought AIM was a social network, just add profiles. Also, why don’t they partner with Bing for search.
creative use of grammar/punctuation/syntax in title to this article.
I don’t agree with him. The ideal approach to a platform like the internet is to marry the audience to you. Newspaper business awaiting fatal kick because it made this mistake too.
“fragmentation”…..i prefer “integration.”
-the web only fragments when you have nothing to hold it together. “whom ever creates the best network of destination channels wins the internet game.”
Love the model. AOL has the captive audience & the diverse content to make this work.
I think this is the golden solution for AOL
Reviving AOL will be tough. aol.com is not visited anymore, aol mail is disaster, mapquest is beaten by google maps, live maps, yahoo maps. aol news is kind of week and with that goes the advertising. i won’t be surprised if aol goes bankrupt. i just don’t know that it is good at? tmz.com might be the only one (the gossip site).
Despite a heavy take up by developers and the more tech savvy crowd, Mapquest has been the leader in that area for a while. I believe Google maps just recently (like past 6 months or so) edged past them. Not sure if it’s different demographics or what, but it’s not too much of a stretch for Mapquest to come back
I think AIM is where AOL has really missed out in the past several years. It was a huge source of communication for anyone I knew from middle school until not long ago as I near the end of my (long) college career. Maybe it’s died because my friends have gotten older and have moved past instant messaging (though many still do, but through gchat instead. I hope they reform and find a refreshing way to get value out of AIM.
Is that retweet button under the comment count new?
Anyway, 6 comments in 4 hours means AOL isn’t that interesting anymore.
It’s been many, many years since I last heard “You’ve Got Mail”.
It’s good to at least see AOL with leadership that acknowledges the fact that consumer portals as they existed 10 years ago (perhaps with the exception of Amazon) are no longer relevant to most consumers or businesses. Perhaps by acknowledging the core breakdown for their model they are one step closer to some turnaround, but it is going to be a super tough slog. Maybe the combo of the coming independence from Time Warner and the ventures group will give them path to some rapid innovation.
Sounds like the right moves.
Sounds like AOL, Yahoo and now MSN are all finally realizing that the age of portals is over. So web 1.0, they all missed the web 2.0 blogs and networks. Just when the web is moving to real time, they are trying to figure out what was hot 10 years ago.
Too little, too late. The companies of the future are Twitter or publisher networks like Glam, or large networks like Google. The age of owning content is over.
The web is fragmenting, and AOL is not likely to survive given they are trying to use the portal and home page for sites.
The convenient solution for AOL.
Great post. Tim Armstrong going for the All-American look there in his photofit
AOL is without doubt in need of being torn down and totally rebuilt. I have my doubts that the patient can be resuscitated. If Armstrong pulls this off he will be a miracle worker.
My most recent issues with AOL are encapsulated at http://rhftech....-aol-worthless/
testar att kommentera med Fbook connect.
There is no reason AOL can’t dominate on strategic, high volume properties. Their properties work and also does their display network for targeted demographics. They need to dump the rest of their strategy and focus on their profitable and obvious strengths.
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Tim has a brilliant strategy. He’s an advertising guy and knows exactly what it takes to generate ad revenue.
As a startup operating in the content business, it’s refreshing to see someone like Tim Armstrong come in and say the right things about AOL’s content strategy.
His ideas are good (the easy part), and if he can execute (the hard part), I think he’ll be AOL’s savior. Focusing on the MediaGlow and content properties is surely what will make AOL relevant to today’s web users again.
A billion dollars in subscription revenue indicates a massive # of users in dial-up segment. I had no idea of with the penetration of cable/dsl and wimax there are still so many dial-up users.
The web is fragmenting including the online retail side of things. AOL might want to consider integrating transactional banners into their services in the future.
His ideas and strategies are very good.
I thought that AOL was going to change its name to TMZ?
AOL has very good quality visitors. I hope they build things around them, and serve them better than anyone else.
gooo Tim
Why don’t you ask Timmy how he plans to make up the difference between the revenue hemorrhaging with the access business and ad sales?
Tim’s response to your question about the distribution/access business was a dodge. It is always about money! Especially when the money is big. How does he figure that if the sub number keeps dropping, that somehow the circulation from those subs will not decline as well?
When you have 6M people paying you $10/mo that is a sweet deal….but that number is way down from the peak of 30M subscribers and continues to fall every month. If current numbers are correct, the access business is generating $720M a year, today. Tim thinks that $720M a year is less important than the alleged traffic they generate for AOL sites? Give me a break!
If the declines in the access subs drop to 5M in 2010, that would be a loss of $120M in just one year! Hell, cut that is half and it still a huge number.
Notice that Tim says NOTHING about how he plans to retain that subscriber traffic, that he characterizes as being invaluable to generating audience for AOL sites, should they stop paying AOL every month.
So, we have a potential loss of $60M to $120M in current access sub revenue for 2010. How are the ad sales folks supposed to come up with $$60-$120M in new incremental sales above and beyond the sure to be lofty targets for 2010?
All of the sound and fury about AOL ad sales is nothing more than musical chairs. At the end of the day advertisers buy eyeballs. Unless Timmy can make the eyeballs jump dramatically, which is a total crapshoot, the convergence of declining access revenues and even healthy ad sales growth will not prevent the creation of a perfect storm for AOL tanking completely.
Timmy and AOL are just like Punch and The New York Times. Declining readership (circulation) great free online content, huge operational cost structures and ad sales that can never close the huge gap between subscription revenues and the money it takes to produce the paper and distribute it.
By the way, you can’t escape by firing people and blaming them for not hitting the numbers when the business model is unworkable and outdated.
Can a destination page have “the stream”? ))
AOL should have turned AIM into twitter a decade ago.
I can’t believe so many people are still stuck with dial-up. Truly a frustrating experience I’m sure, since it was terrible a decade ago.