AOL made money, and seemed poised to be perhaps the dominant portal for Internet experience. Some critics even worried that it was poised to take over the Internet.Only then portal model disappeared, along with all the excitingly vague promises that constituted the .com bubble. Oh, and AOL operated mostly on dial-up phone lines, which is kind of like owning a buggy whip distributorship.
Subscribers and traffic have fallen ever since, from 25+ million paying users to just under 7 million subscribers at the end of last year (it lost over a half million in the first quarter of 2009 alone). Ad revenue dropped 20% in the first quarter, after dropping 18% in 4Q2008.It still commands the fourth largest online audience in the U.S., though, and it earns a profit from pushing ads in front of all those eyeballs, even if said eyeballs don't belong to the youngest, hippest, or most likely to spend.
The problem is that sucking the Internet through the digital corollary of a McDonald's straw doesn't have a future. Time Warner's $6 billionish stake values the access and ad businesses as roughly equivalent, but I'd suspect those dial-ups go away faster than it would hope (and don't represent the right eyeballs for advertisers to exploit anyway).So what happens differently for a stand-alone AOL?First and foremost, Time Warner can forget about it. That's a huge accomplishment, kind of like Daimler Benz dumping Chrysler on Cerberus. Then, after you wade past all the nonsense blather about "renewed focus" and whatever else the marketers make up to explain how getting abandoned at 5% of its original value is a good thing, you get to CEO Armstrong's strategy: Content.
It's an old media approach, really. Armstrong wants to rebuild the tollbooth to the Internet highway, only with a brick wall after the coin bucket. A really pretty wall, but a wall nevertheless, on which will be lots of ads. AOL has all this traffic, even if it's shrinking, so it sees its challenge as that of monetizing those visits with advertising revenue. TMZ, AOL News, Asylum, and lots of sites on the drawing boards will give folks reasons to stay at AOL-owned properties, commercial access to which it can sell to the highest bidders.I think this strategy has two problems: first, the ad model for Internet visits is going to fade away much like the portal idea did.
Nobody likes online ads, and their ROI efficacy still befuddles otherwise smart marketers. Second, there's nothing saying that AOL can develop content any better than, well, anybody else. That's why broadcast and cable TV networks outsource program development to the marketplace, as do the movie makers in Hollywood. It's like AOL owns an empty warehouse and wants to compete with a fine arts museum by painting its own pictures, and then displaying them with ads.All is not lost, of course.
AOL could choose to invent real, behavioral ways to impact the lives of its visitors:I've never understood why it hasn't built real communities, not just the easy, anonymous throwaway traffic of chatDitto for its thriving email business, which could provide platforms for communities and/or outsourced corporate networks.
Why couldn't visiting the Internet through AOL be some badge or tool to do so better, faster, or more intelligently?Being an AOL member could have a frequent-troller loyalty component, irrespective of what sites get visitedWhere's the AOL social search bar? Without such true invention, not just the babblespeak of innovation, I worry that Time Warner is simply abandoning a tollbooth that'll take us nowhere. It should drive away as quickly as possible.
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