We’ve been encouraged by the signs of life at AOL in recent months–namely, acquisitions, new ad units, Yahoo-deal-talk, and other activity that AOL’s former CEO Steve Case summarized as the company “playing offence” again.
One day it seemed AOL was stoked about the premium content business (TechCrunch, etc.). The next it seemed enamoured of Demand-Media style robo-content (Seed). The next it was infatuated with “platforms” (5min). And the next CEO Tim Armstrong was going on about local (Patch) again.
And, meanwhile, the company’s revenue continued to crater.
No company can do everything, and it has often seemed that AOL was unwilling to make the tough decisions necessary to trim its grab-bag of largely unrelated businesses into a cohesive growth engine with a single mission. And there’s no question that the company still has more work to do on that.
But the overall strategy, we are pleased to say, is coming together.
According to a source familiar with AOL’s current thinking, here’s what AOL is trying to build:
- DISTRIBUTION composed of the access business, AOL.com, SEO, et al
- CONTENT focused on three main areas: WOMEN, INFLUENCERS, and LOCAL
- TECHNOLOGY that supports all the company’s content as well as third-party content
The choice of the three main content areas, by the way, is based on the following logic:
- 80% of spending is controlled by women (thus that’s who advertisers want to reach)
- 80% of spending is influenced by influencers (again, that’s who advertisers want to reach)
- 80% of spending is local
So AOL is aligning its properties to go after those three big buckets.
And AOL has made a few important changes that have brought this closer to reality.
First, says our source, the company has narrowed down the number of brands it is trying to support from more than 300 when current management took over to 37. It is a LOT easier to build and manage 37 brands than 300. And 37 brands isn’t actually that many more brands than a big magazine or newspaper publisher like Time Inc. or Gannett manages.
Second, AOL is building a common content management system to run its entire business off of. This is easier said than done, but if the company is successful, the new CMS will go a long way toward knitting everything together.
Third, the company’s sales-force restructuring, which clobbered revenue for several quarters, now appears to be taking hold. We’re still not clear on how the company plans to manage the conflict between its premium sales force and its remnant direct-response business (Ad.com), but if it can’t figure that out, Ad.com can always be sold off.
OF COURSE, STRATEGY ISN’T EVERYTHING–YOU STILL NEED TO EXECUTE
Now, to be clear, just because AOL has a coherent strategy doesn’t mean the turnaround will be a success. Just because you know where you want to sail your ship to doesn’t mean you’ll get there. Especially when your crew is composed of depressed, battered folks who have been thrown together and ordered around by so many different captains in recent years that many have just given up.
But knowing where you’re trying to get to is a prerequisite for even having a CHANCE of getting there. And it’s more than another huge Internet turnaround story, Yahoo, has going for it.
(Yahoo’s assets are vastly more powerful, cohesive, and valuable than AOL’s. But we’ve been waiting more than a year now for Yahoo management to tell us where they’re trying to sail the ship, and we still don’t know.)
And complicating this problem is the fact that AOL’s middle-management still doesn’t seem clear on where the ship is headed. Sources we have spoken to in recent months say that every senior manager still seems headed toward a different destination and/or has a different idea about how their particular business is supposed to serve the company’s overall mission.
So that’s one big communication and management problem AOL has to deal with.
But, again, that’s an execution problem, not a strategy problem. And at least for now, the company’s strategy seems sound.
(Of course, another big problem is that, no matter what AOL does, the access and search portions of its revenue will continue to decline–and they are 2/3 of the business. But that’s a different issue…).