AOL is in a dreadful state of affairs with Randy Falco and Ron Grant (aka “Smithers & Burns”, a snarky insider reference to characters on The Simpsons) now running the show. I said last year that AOL was moving away from access into advertising, that Falco did not understand the Internet or any aspect of AOL’s business, and I always thought that tiny Ron Grant, (i.e. “Falco’s brain” or some such thing) was fairly clueless. I haven’t called it wrong yet, so love me or hate me, don’t say I never gave you a good (and early) warning.
If you want to live in some sort of Utopia where AOL always come out on top even with foolhardy, spendthrift morons running it with no clear vision or direction to take the company to the next level, then feel free to ignore me. I don’t suffer fools gladly, though, so don’t come crying to me when I have to turn in my last post because AOL has finally been sold off or dissolved by someone with a brain.
What led up to the layoffs is a perfect example of AOL’s runaway corporate irresponsibility. If I was an employee of AOL, still employed or otherwise, I would be gasping at the wastefulness and chicanery of higher ups grasping at straws at the expense of my job. It’s a perfect scandal.
At AOL We’re Poised to Become AOoooogle
AOL lost in the access business, not just because their Customer Service and Tech Support are deceptive and/or unknowledgeable, nor because people are tired of their Walled Garden, nor because AOL’s software-based access clogged up people’s computers and failed to change with the times, but because more and more people use broadband and DSL now than ever before, leaving AOL with only 9 million subscribers as I write this. AOL does not own or lay cable or high-speed phone lines in the US, where the bulk of their access business once was.
AOL should’ve bought the cable lines and high-speed optic fiber that it needed a long time ago if they hoped to compete in today’s high-speed world. The reason they didn’t is as early as 2001 they thought there was more money in advertising. To that end, AOL has spent more money on advertising platforms and spyware-like technology to monitor ad impressions than it would have cost them to buy or build their own cable and DSL lines and keep this year’s laid off folks on board with 20% raises every year for the next five years.
Here’s a list of the advertising platforms and technology that could save AOL if they had any clue how to make their ideas work without sacrificing AOLer’s jobs:
- AOL claimed selling a 5% stake to Google and using Google’s search engine to return results on AOL would help their sites achieve higher Page Rank and become “more visible” in Google, with Google splitting profits with AOL for ads. The catch is, if the deal doesn’t work out, Google is already a 5% stakeholder, and can well afford to to buy the rest of the business in a heartbeat with all that positive cash flow and high market cap that just put a well-known anti-Google site out of business…again.
- Advertising.com, a well-known deliverer of spyware and pop-up ads for the masses until they cleaned up their act after the acquisition, barely showed up on anyone’s radar once it was acquired by AOL…until 2006, when it’s profits blew open with increased revenue of 46% quarter to quarter until this summer, when profits slid down an astounding 30%. Too bad AOL had gone on a manic ad platform buying spree by then…
- AOL acquired this small specialized company in May of 2006 for an undisclosed sum to insert ads into audio and video content, which makes sense in light of their purchase of Truveo, a video search engine, around the same time.
- This deal, made in May 2007, was supposed to bolster AOL’s ad profits in the mobile sector, even though Third Screen, like AdTech below, caters to a mostly European audience. Rumored purchase price was around $100 million. Statistics on how well TSM does in the mobile sector don’t seem available on TSM’s website or through a search of their company on the Internet.
- In May 2007 AOL bought AdTech, a platform that gives advertisers various campaign management and reporting tools, for an undisclosed sum. AOL had just lost out on a $900 million bid for TradeDoubler so one can imagine AdTech cost AOL a pretty penny. The deal was said to help expand AOL’s reach to European audiences. Interestingly, days before AOL’s purchase of a controlling interest, Adtech released a report that shows only 1 of every 1,000 ad impressions results in a sale, a dismally low .18% conversion rate. Read it and weep, unemployed AOLers.
- This plume in Randy Falco’s cap, acquired for around $275 million in July of 2007, was the reason AOL executives were so self-congratulatory this year that they felt the urgent need to build an executive dining room for themselves, to remake AOL into Platform A, a moniker that is said to be a very uninspired ripoff of Avenue A (another advertising platform’s name), to move to New York just to show how “serious” they are about advertising (I haven’t stopped giggling over that one yet) and to lay off as many people who were helping to grow and improve their online portals and their software as possible.
- Platform A will tie all of AOL’s advertising companies together into one neat network that is supposed to make Google, which now owns DoubleClick, and Microsoft, which now owns aQuantive, and Yahoo!, which as always is tooting along with Overture, roll over and play dead from the sheer amount of powerful ad-awesomeness now emanating from their company.
Ads At the Expense of Brand Dilution
How does AOL plan to make their ad business increase their brand’s reach and popularity among today’s Internet audience? Falco was asked that question recently, and his thought is that people won’t be familiar with or seek out the AOL brand anymore, not for email or chat or news. He thinks people will simply stumble upon AOL after they “click a link in Blogging Stocks” (a blog owned by AOL) and supposedly be wowed by AOL’s design and content from there. Him and Dick Parsons now envision the future of AOL as an ‘online Proctor & Gamble™’, a conglomerate of brands and names as diverse as TMZ.com, AOL Video, Platform A, etc.
I don’t give AOL much of a chance for reasons that are obvious to me. They’ve floundered for years – since their subscription numbers began dropping – and haven’t come up with a clear way to save themselves yet (“…well, maybe if we bought Netscape…no, ICQ…wait, maybe if we buy Weblogs…no, maybe if we turn our Cancellation Dept. into the Retention Nazis, no…now we think offering our own AOL PC [there really was such a thing, folks, but AOL no longer offers it] will help us survive this transition…”).
Maybe you laid-off folks should be grateful you got out (even if AOL had to push you out) when you did. With the brand dilution they’ve performed on their own sites in the last year (changing the home page to look like Yahoo’s, only much worse…like I came up with the design, let’s say), the online email system that is just a barebones unholy mess compare to Yahoo’s, and all of the premium content being given away now on AOL for free, AOL as a portal and as a brand is over with. AOL has lost it’s aura of money and exclusivity and is exposed now for what it is: just another has-been looking for ways to advertise at you any way they can.