tim armstrong

Tim Armstrong Prepares AOL For a Fragmenting Web

Next Story

Digg's Kevin Rose Not Pleased With DiggBar Change

The days of the Web portal are long gone. Everyone knows this, especially the people who run the largest destination sites on the Web. AOL’s newest CEO, Tim Armstrong, acknowledges this fact. “We think the Web will fragment in the future,” he tells me. “I think you have to be agnostic about where your content goes. If they want to get it on Twitter, you should let them get it on Twitter. If they want to get it on your destination site, then let them do that.”

Last week marked the first 100 days since Armstrong left Google to take over as CEO of AOL
. He’s spent most of that time trying “to figure out what the company does today, what it is strong at, and what it is not strong at.” After digesting all of that information, he is now zeroing in on five areas where he thinks AOL can excel at (and social networking is not one of them, thankfully). The five areas of focus are:

  1. Content
  2. Advertising
  3. Local and Mapping
  4. Communications
  5. AOL Ventures

When he talks about the first two, he talks about “scaled content” and “scaled advertising,” yet he is very much pursuing a niche content strategy married to a highly targeted, brand advertising approach. AOL is already going down this path with its collection of MediaGlow sites (which include, Engadget, TMZ, and Love.com). We’ve called this the “Toyota strategy” because it consists of creating standalone online media properties which appeal to niche audiences much like magazines used to do in the world of print media.

Which is not to say that Armstrong is chucking the AOL brand out the window. He is just being selective about where he uses it. “My guess is that there are places where the AOL brand will be very helpful,” he says: “A good housekeeping seal of approval. In other places, you don’t want it because it means something different.”

On the advertising front, he thinks AOL jumped into the ad network game at the wrong time right as the economic downturn hit. AOL was left with too much generic ad inventory and not enough inventory appealing to brand advertisers. (Hence, the niche content/magazine-like approach).

Another market he is bullish on is localized content and mapping. AOL owns Mapquest, which needs to be reinvigorated. It also just bought local news site Patch and local events listings site Going. (Armstrong was a shareholder in Patch, but didn’t accept any profits from the transaction beyond his initial investment). Local content remains a huge opportunity on the Web.

I asked Armstrong how he feels about the center of attention on the Web moving away from destination sites to personalized streams of data such as what you find on Twitter and Facebook. “Real-time messaging feeds have a wide spectrum of usage,” he replied. “In some places speed is more important than depth. In others, depth is more important than speed.” He is pretty much agnostic about where people find AOL content, as long as they return to AOL to read it (and maybe click on an ad or two while they are there).

At the same time, AOL is trying to leverage AIM to get into the lifestreaming game. Communications (email, IM, SMS) is one of AOL’s core areas Armstrong wants to strengthen. And to the extent that he can combine personal communications with public streams, he can play there as well.

Content, advertising, and communications are the areas where he feels AOL can play to its strengths. When I asked about search and search advertising, he responded, “Search has taken up a lot of oxygen in that space and rightly so, it has performed well for advertisers and funded a lot of other things.” But he thinks display brand advertising is poised for a comeback once we come out of the economic downturn. “There are a bunch of large players kicking the search ball,” he adds. “We probably don’t consider ourselves in that quadrant.”

Finally, Armstrong set up AOL Ventures as a place to invest in early-stage startups, as well as to park businesses which need fixing or outside investment, Bebo being a case in point. It’s been shunted to AOL Ventures. Armstrong is clearly distancing himself from the $850 million Bebo debacle. He describes one of the imperatives for AOL Ventures as “to keep things on track that have not been on track.” On the M&A front, he says AOL will continue to make “smaller acquisitions” to pick up key technology, engineering talent, unique content, or more advertising scale. “Will we do acquisitions the size of Bebo? My plan is No.”

Armstrong is getting AOL ready to be spun off from Time Warner in an IPO. As part of that transaction, the original thinking was that AOL’s legacy dial-up business wouldn’t be a part of that, but Armstrong has changed his mind. It is not only the roughly $1 billion in annual subscription revenues AOL still generates from the dial-up business that convinced him to keep it. That is quickly declining. But just as important is the traffic and distribution which comes from those locked-in customers. “If you were going to try to recreate the access traffic it would be very expensive to recreate,” notes Armstrong. (ComScore estimates that about 19 million of AOL’s 106 million unique U.S. visitors a month still come from AOL’s client app). When you are trying to build an advertising business, every eyeball counts.

blog comments powered by Disqus