AOL tries to sell more ads with honey than vinegar
Posted by configure on 22 July 2002 - 08:06 · 2 comments & 134 views
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The service's sputtering ad sales have weighed down AOL Time Warner's share price. And they played a role last week in the exit of the titan's chief operating officer, Robert Pittman, who came from AOL, and the elevation of Time Warner veterans Don Logan and Jeff Bewkes to split No. 2 duties.
AOL ad and commerce revenue is projected at $2 billion this year, down from $2.7 billion in 2001.
Advertising also was at the center of a Washington Post report last week that said AOL propped up revenue by $270 million in 2000 and 2001 with creative accounting and ad scheduling.
AOL says the accounting was proper and the deals accounted for less than 5% of ad revenue. And Robert Sherman, president of AOL Interactive Marketing, says he has heard no concerns from advertisers about ad placements.
But he says AOL has adopted a gentler style. It was known for strong-arming dot-com advertisers into pricey deals. That alienated clients and may have hurt sales. "They kind of rammed it down your throat," says Andrew Pakula, CEO of ORB online marketing.
"There are people who believe they've been treated in an arrogant way, and if that's true it has no place in a win-win process," Sherman says.
AOL also:
- Restructured its ad unit by region to put sales representatives closer to clients and cut bureaucracy to get ads on quicker. "There's a single point of accountability," says Jim Warner, president of Avenue A/NYC online ad agency.
- Is making its ads more dynamic, such as 3-D, which its proprietary software previously did not permit. Yahoo and MSN lead AOL in this, experts say.
- Offers more flexible terms in ad deals. "In the past, they were harder to deal with," Warner says.
- Will continue to cross-platform ad deals with Time Warner divisions, but each unit will be more autonomous.
But AOL still resists some changes advocated by online ad agencies."They need to better target ads to subscribers," Pakula says. "The promise of AOL was. 'I've got people signed up, and I know who they are.' " Sherman, however, says AOL will not provide personal data to advertisers unless subscribers give their OK. He is also reluctant to offer pay-for-performance deals that make advertisers pay only when users click on an ad or buy. But he says he's open to limited arrangements.
Analysts say AOL's efforts will help, but significant ad revenue gains will take a rebound in the online ad market. That's up to a year away, says Charles Buchwalter of Nielsen/NetRatings.