Media: All about ... AOL

By Alasdair Reid, campaignlive.co.uk, Friday, 22 January 2010 12:00AM

Cuts keep coming as the company seeks to streamline.

AOL Advertising did well in the last IPA Digital Media Owners survey, conducted in September 2009. When asked to assess the statement "My overall experience of dealing with this supplier is a good one", more than 60 per cent of respondents agreed or strongly agreed where AOL was concerned.

It came fifth in the league table, behind Specific, Vibrant, Channel4.com and Microsoft Advertising. Tellingly, though, it was the outfit that had shown most improvement in comparison with the previous survey, conducted six months previously.

This was not just commendable, it was almost miraculous, given all that the company had been through. A corner had been turned. Or so we thought. Given all that's happened in recent days, the next IPA survey could make for interesting reading.

Because last week, the company seemed to be back in somewhat familiar territory, with all sorts of defenestrations befalling unlucky members of the AOL tribe; while the slightly less unlucky were (seemingly) being invited to act dazed and numb or to run around in circles like headless chickens.

High-profile departures in the UK included Michael Steckler, the company's managing director, and Sarah Perry, the sales director of its advertising sales division, AOL Advertising. Both took voluntary redundancy and their exits were not unconnected with a continuing AOL drive to save $300 million globally by cutting 2,300 jobs - a third of the workforce.

And, yes, it's true that this programme was announced back in November 2009 - but it has now been announced that offices are to be closed in Europe (France, Germany, the Netherlands and Spain, for instance) and the cuts will run deep in the US too.

One surprising announcement last week concerned Shashi Seth, AOL's senior vice-president of global advertising products. He had been hired as recently as September - and though he jumped rather than being pushed (he's to join Yahoo!), the timing is no accident and it seems to be a rather baleful (for AOL, at any rate) indicator.

1. The big-picture context here is AOL's continuing determination to put behind it the fall-out from what has been described in many quarters as the worst business deal in corporate history. Based on chronically optimistic forecasts of its growth prospects, AOL was vastly overvalued when it merged with Time Warner in 2001 to create a monster valued at $350 billion. The merger was always an accident waiting to happen in that the two corporate cultures were never going to fit together satisfactorily - but management problems were compounded when AOL's business model (and therefore its revenue prospects) fell apart almost overnight. It entered the merger as an internet service provider; it has rapidly been forced to reinvent itself as an advertising-supported portal wedded to a sales network operation for third-party website operators.

2. In February 2008, Time Warner announced it was splitting AOL's ISP operations from the rest of the business, with a view to their disposal on a country-by-country basis. In the UK, the purchaser was Carphone Warehouse.

3. In May 2008, AOL completed an $850 million acquisition of the social networking website Bebo, just in time to see it eclipsed by Facebook. Yahoo! has continued to sell Bebo's advertising, despite expectation that this task would be brought in-house - and speculation intensified last year that AOL hopes to offload it.

4. In March 2009, AOL announced it had persuaded Google's senior vice-president, Tim Armstrong, to become AOL's chief executive, to prepare the company for the next phase, most notably spinning it out of Time Warner once more via a New York Stock Exchange flotation - which eventually went ahead in December 2009. In the interim, Armstrong embarked on a restructuring and rebranding process. For instance, its advertising operations, which had been grouped into a division called Platform A in 2007, were reconstituted in a new division called AOL Advertising.

5. In the wake of last week's departures, it was announced that Kate Burns will run AOL UK while retaining her existing role as the company's European head of advertising sales.

WHAT IT MEANS FOR ...

AOL

- Many observers had expected (or hoped) that AOL would go from strength to strength, having freed itself from the stodgy management outlook of the Time Warner megalith. Further, they'd reckoned that the company had managed to absorb the worst of any restructuring pain last year.

- So recent events are devastating for the company's confidence rating, both internally and externally; and it reopens questions about the company's strategic vision.

- It desperately needs to conjure up some good news - and soon.

ADVERTISERS

- The biggest concern for the advertising market is whether there will be any real continuity in terms of day-to-day representation and trading - and some in the market were disappointed, to say the least, about the company's lack of willingness to keep them informed last week.

- And, yet, there is a remarkable level of residual good will. As Will Smyth, the head of digital at OMD UK, puts it: "I don't think what is happening is by any means a total disaster. We've seen similar restructuring programmes taking place at other online sales operations, with significant numbers of departures - it's just that some other companies have managed to do it without attracting attention to themselves. Trading is going to continue to be difficult for the next few months. Businesses that were well managed and well run during the boom years will be fine. Flabby businesses will suffer - as in any sector. AOL is continuing to take steps to ensure it's a well-run business."

This article was first published on campaignlive.co.uk

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