Why AOL’s Ad Revenue Collapsed (TWX)


Yesterday, we took AOL’s replacement of Platform A head Lynda Clarizio with Yahoo’s Greg Coleman as a sign that AOL’s emphasis on third-party ad networks had failed and that the company was tacking back toward to its premium-display roots.  We also suggested that Lynda’s decision to integrate the Advertising.com and AOL salesforces by canning a lot of AOL folks had hurt the company’s ability to sell premium display ads.

Since yesterday, we have heard from many folks close to the company, some of whom have more nuanced (and sometimes conflicting) views.  Here are some excerpts:

I can tell you a couple facts you’re missing re. the Platform A shake up.

1. The idea to form Platform A was the baby of Ron Grant and Curt Viebranz.  They devised a strategy, which at the time was driven by Viebranz’s network/ BT view of the world.  They named this concept Platform A.  After Curt demonstrated a lack of success, they handed it over to Lynda.  Lynda, prior to that moment in time, wanted to keep the 3rd party ad network business separate from branded display, and she almost got fired for insubordination when she loudly objected to combining these groups.  Of course, once they handed it over to her, she had to try to make it work.

2. She fired a lot of Tacoda people, but only a couple of mid-level AOL media people who were deemed to be “actively disengaged.”  Everyone else stayed, and in fact, many ad.com people were actually jilted in favour of AOL media people in senior positions.  With the exception of Don Kennedy and Mike Peralta, every other senior leadership position is sales is, still today, manned by a legacy AOL media person.  This includes VP’s of West coast overall, San Francisco, LA, Midwest overall, Chicago, Detroit, Northeast overall, NY, Boston, Midatlantic, Texas and Atlanta.  

There’s only one ad.commer holding a major regional leadership position, and that’s Brent Herd in the SE region, and his team is actually doing pretty well, comparitively.  So it’s fair to say that Lynda didn’t know much about premium branded display, but it’s incorrect to say that anything is going to change.  San Francisco is the worst performing region in the country, and it’s managed by legacy AOL media people in all 3 positions– director, VP, and RVP.  At some point, the blame needs to fall on the regional salespeople at AOL who have been in those positions for 10 years, and each year see another leader take the fall for their lack of ability.

Grant and Falco bet the farm on Ads.com and the money it had brought in, figuring Clarizio was their ad sales Madonna.  As you know, she installed all of her Ads.com buddies, Don Kennedy, Mike Peralta as her chief lieutenants. 
They then plugged all of their guys into running most of the regional offices.  None of them had any experience in display, just the ad network, which was nothing but junk inventory.
Last year, the response rates for Ads.com inventory dropped dramatically, to the point where they were running 3x the number of impressions to generate the same response or performance levels as the year before.  
Most importantly, Clarizio, Kennedy and Peralta never left the building to make sales calls.  Why would they?  Ads.com sold junk, so they never had to stroke agencies or clients.  Display was made a step-child.  Now the chickens have come home to roost.
Strikes me, as it did you that this latest move is nothing more than a “Hail Mary” play for Grant and Falco to keep their jobs until Bewkes dumps AOL in a yard sale. Premium selling was always part of the strategy. Look at Media Glow and the focus on new brands. Time Warner wanted a more content focused approach. The problem was Lynda’s team didn’t know how to sell it.

Henry, you are not correct. The majority of the sellers at Platform-A came from the AOL side. The fact is most of them like to complain about nothing instead of selling.There was little to no cuts on the sales side from AOL.  A bunch of them went into management and or property sales instead of being on the street.

I don’t know whether 70% of sellers are still from the AOL side. That may or may not be true. But I CAN tell you with certainty that they canned a great deal of sales support staff from the AOL side. Sales support = the people who respond to RFPs, create sales packages, and so on. In other words, the brains behind the Sales force. AOL is a complex beast, so once these people were let go, most sales people wouldn’t have a clue how to proceed, whether they came from AOL or not.

the info you got from 70% of sellers was partly correct. While many sellers remained from AOL they were, for the most part under the direction of Don Kennedy from Ad.com and Mike Peralta from Ad.com. Neither had any ad Display background. In fact, if I am correct Mike Peralta who ran sales under Don was an engineer…Never worked in Media and had no Advertsing or Marketing background. He was hired at Ad.com and worked his way up. So, in effect, neither Lynda, Don or Mike had any Ad business sense. And unfortunatley, as their numbers are going to show…that just doesn’t work. So while they may have kept sales people, they did not motivate, reward, or compensate them for selling the tougher and more profitable business..display. Because in fairness to them they HAD NO EXPERIENCE!! So while Lynda trusted them she effectively fired many of those that did have the experience.And while people can blame the economy I dare to say….display is still being sold but it takes salesmanship. CMO’s don’t want to hear about technology they want to hear about marketing solutions and ideas that compliment the use of the technology.

This is what happens when people that do not understand the business are put in charge.

The premium vs. remnant issue is not a Lynda issue. It was Management’s decision to buy into the vision that premium and remnant solutions need to be integrated.

This lack of vision is what drove R&R [Randy and Ron] to copy Yahoo when they first got to AOL. They did not realise that Yahoo was heading for trouble 18 months later.

Anyone who has spent some time on the Web can tell you that you cannot manufacture success the way you could in traditional media. Not knowing this leads you to buy a product like Bebo. Simply because you believe that all it needs to gain adoption is exposure/marketing.

R&R also would have known that product innovation is difficult to occur a large internet companies. M&A is keep to keep your products innovative/compelling. If they knew that they would not have spent $1B in low-margin advertising networks. They would have realised they should have bought some good products.

The Web changes pretty rapidly. Unless you have a deep understanding about where things are going, you will not be able to catch up.

I hope Yahoo appreciates whats going on at AOL and avoids the same fate.

AOL lost the leadership of their display team at the integration. Mike Kelly (who bought Ad.com) got canned. Kathy Kayse and Janet Balis left. The were rock stars.  They lost out to FOBs (Friends of Bewkes).

One problem is that AOL keeps creating new properties, over 90, and spends NO marketing dollars to help build the brand, and then they expect Platform-A to sell it as top premium inventory.

Old AOL property sales are up in revenue YOY, it is these other properties that have zero value in the marketplace that continue to confuse sales and add more items for everyone to sell,

See Also: Meet Greg Coleman, AOL’s New Ad Guy