by Kara Swisher
What I worry most about are the phrases I began to hear almost constantly about AOL from high-ranking corporate executives at AOL Time Warner—“we need to stabilize it,” “we need to bring it under control,” “we need to put in a process.“ I know what they mean—AOL has long been a management mess, chaotic and hard to understand. But in imposing order, I fear that the new managers will also drown out more essential elements of spirit that are harder to reignite. AOL has already suffered from too many khaki-wearing MBAs with little feel for the product. It needs more dreamers.
Problem: Lack of Product Innovation
Simply put, AOL has long ignored its basic product offering to consumers. It has inexplicably allowed its software to atrophy, despite the periodic and noisy rollouts of new versions. But AOL should have assessed its product more honestly. Aside from a few fluffy new features, very little of substance has been added to the main dial-up product for years now. Amazon makes more improvements to its online commerce tools in one day than AOL makes in hundreds.
And therein lies the problem: The Web continues to both innovate and simplify, getting closer to becoming one big version of AOL. Even AOL’s chat areas, once a major attraction (especially for sex chat), seem poor compared to the more sophisticated tools now available on the Web. And AOL’s email tools remain weak in comparison to Yahoo’s, relying too much on adding more and more silly icons. The service also continues to be impossible to navigate beyond the front screen—hasn’t anyone at AOL ever heard of a table of contents? And don’t get me started on the spam issue—I know it’s hard to fix, but fix it anyway. Without better spam filters—and soon—AOL will lose its two most important constituencies, women and children.
Solution: AOL’s product guru, David Gang, who is hard at work on this problem, was pretty blunt. “We have let our product get shitty,” he said. “But if you put out a great product at a great price, consumers will buy it.” Uh-huh. First, as Miller also noted, AOL has to “innovate the essential and blow away with the basic.” By that, he’s referring to updating and improving the stalwart parts of AOL—email, news, chat, IM tools, and anti-spam tools. After that, AOL has to slowly lace in new stuff being used on the Web, clean up its clutter, and help its users find what they want. As everyone races to the next new thing, AOL needs to be a fast follower.
AOL has certainly ramped up its metabolism, finally making meaningful changes in its latest version—9.0—in mid-2003. Coming quickly on the heels of the weak rollout of 8.0, AOL has added important anti-virus software, stronger spam filters, and parental control tools, better ability to personalize screens, improved mail management, sassier communications and chat features and well-integrated multi-media offerings. That’s good for AOL, except these changes were years overdue and already present in a plethora of other competing services. AOL now has to keep pace and even surprise its users again if it wants to keep them using the service. It is not the jalopy that its rivals like to call it, but neither is it offering that new-car feeling.
Problem: Lack of Customer Service, Declines in Subscribers
More and more, these two issues have gone hand in hand. For years, AOL—well known for abusing any member who had a problem—always had a willing pool of new customers it could keep marketing to in order to replace those who churned off the system. This is obviously no longer the case, as the numbers of prospects AOL can draw from have dwindled and are going negative in the important U.S. market.
This dial-up market, as everyone knows by now, is static as more and more consumers replace their slower connections with faster—and pricier—broadband ones. On the opposite end, low-cost dial-up services are proliferating and growing by stealing business from AOL. Millions will leave the service over the next two years, this is a near certainty. There will be a level at which AOL will stop bleeding customers, since many people—including myself—like to have a dial-up alternative for traveling and others are satisfied with the AOL experience. But AOL’s future lies in keeping happy the current customers it has and generating more incremental revenues per member, rather than nabbing new ones.
Solution: There’s no magic here, except to increase customer service initiatives to turn around what AOL insiders tell me is very low member satisfaction. Instead of rolling out new versions—a practice the tech industry is addicted to—AOL now says it will be adding useful features and tools on a daily basis and improving problems more regularly. This is a good thing. The AOL customer, I suspect, does not want to be wowed as much as well served, and the simple ability to get through to the company goes a long way.
New ways of marketing to customers are also needed, and I’d drastically cut the marketing budget and funnel the money to more useful research and development projects. Others disagree, noting that AOL must remain a ubiquitous marketer like Coca-Cola. But I think that money is better spent on other more worthwhile initiatives that would have a big impact. Why not, as one former AOL executive suggested, appoint a central “Spam Czar,” whose only job is to rid the service of those irksome emails? Dumping pop-ups is a good first step, but ending AOL’s annoying inability to mesh with lots of other popular Web applications would be a much better one. And what about a price cut?
Problem: Loss of Community Roots
One of AOL’s greatest accomplishments was recognizing how important its robust online community was to its users. This was how AOL got popular in the first place and how it roared past other competitors. A lot of AOL’s “genius,” in fact, actually lay in simply getting out of the way of customers and letting them define the service. When people get online—much as those online quilters I met at AOL had done long ago—they do what they want and in ways that are impossible to program. No media company can control this, and they shouldn’t even try. The proliferation of Web logs, or “blogs,” in which people post their own diaries, opinions, and reactions to other blogs, is the latest iteration of this trend, and it has exploded in popularity and has had huge impact on politics and culture. Inexplicably, AOL was nowhere in this space, until its rollout of blog tools in mid-2003. What took so long?
Author and law professor Lawrence Lessig has dubbed this compelling community activity the “social commons,” a right of society to have content thrive in the public domain without interference from big media. Lessig sees big media as a danger to this kind of development, and he’s right that most users ultimately coalesce around fewer and fewer big destinations. AOL didn’t help matters by pushing more features that attempt to guide users to their ad-supported (and too often ad-programmed) sites inside the service, rather than rely on members to lead the way.
Solution: AOL should sell itself as a space where people meet, rather than a place where they get all sorts of programming shoved down their throats. Let a thousand Web flowers bloom. It’s a lot harder than it looks, but AOL has got to take down every barrier it has constructed and let people do what they want. By providing the best tools for online engagement, AOL will become a needed part of that dialogue.
Many sites on the Web are now perfecting increasingly sophisticated tools for interaction—aimed mostly at teens, which has been AOL’s most loyal user base. One application being developed at Microsoft, for example, called NetGen, allows teens to form groups as easily as they might create a real, live party, with the ability to program music, chat, and share information easily. Another site called Second Life is an exciting online community created by its members. In comparison, AOL’s current tools had become antiquated, although similar changes are now being made. Here, AOL should lead the pack. The new “Super Buddy” animated icons in 9.0 are a step in the right direction, but are still not enough to hold ever-fickle teens.
Problem: Diminution of Brand
Other than Martha Stewart and the fine folks over at Enron, is there any other brand that has gotten more dinged than AOL in the past few years? It’s almost pathetic how badly one of the online industry’s best-known monikers has gotten slapped around externally and, worst of all, internal
ly. While Ted Leonsis argued to me that consumers distinguish between “AOL the service and AOL the company,” I’m not so sure about that. And internal polls by AOL of its members confirm that the troubles of the corporation are badly hurting the service. Right now, with the spate of investigation and lawsuits, the stories of internal bickering, and a general feeling that the company is under siege, the brand has been getting a workout.
Solution: I am not sure why it took so long for someone to make Ted Turner and all those bellyachers at Time Warner happy (and perhaps even shut them up) by pulling AOL off the corporate name and returning it back to Time Warner, so the inevitable sign can go up at the eventual ribbon-cutting of the new headquarters at Columbus Circle in Manhattan. Such a move was planned to occur in the fall of 2003, when the company hoped to settle its government problems. The move was also being delayed until after the rollout of 9.0 to avoid linking it with the inexorable spate of media stories sure to rehash the merger-from-hell story line when the news was unveiled. Word began to leak out that the name change would happen in the summer of 2003. So expect it to happen sooner.
Interestingly, those running the online service were the most aggressive in pushing for the name change and for a good reason, especially AOL CEO Jon Miller, who urged Dick Parsons to give him back the brand. Removing those three letters from the front of the corporate moniker would presumably allow the AOL brand to again refer solely to the well-known online service, where it belongs. And it will enable its executives to craft new definitions of its products, separate from the main company and away from the image of the disastrous merger. A great brand, which is hard to create, is one of AOL’s great assets and needs to be protected at all costs.
Problem: Decline in Ad Sales
One of the canards of current coverage is that AOL’s ad sales are doomed. Well, that’s true of the old mega-deal efforts that made no business sense for clients, who were only buying in hope of an IPO pop and little else. The confusion between ads and programming also got woefully confusing, so much so that a billboard on a highway was more honest than AOL’s tacky infomercial approach. That practice has thankfully stopped—mostly because no one wants to buy these kinds of slots anymore. As Leonsis delicately noted to me, “I think we have taken the service back from the unnatural acts which we were performing.”
But there is no question AOL has had to start from scratch in remaking its reputation in the ad community. Yahoo has already been at that task for years now and so AOL is going to be doling out a lot of apologies for its dot-com arrogance and swaggering behavior. Its ad staff is also in the midst of wrenching changes and has to shift into a more traditional structure that has been required in the new economic paradigm. Again, this is basic block-and-tackling work that has to occur before AOL can really move forward in any meaningful way, something which Don Logan excels at.
Solution: Ad sales online are going to grow and grow big—just not as quickly as many had hoped. But the trends are moving upward as both big and small advertisers continue their experimentation with video and audio, as well as highly targeted ads, in the more robust broadband environment. There is no real killer app here, just simple tactical moves to see what works best and where. Even the once-hyped focus on “niche” or one-on-one advertising—that is, ads that are directed specifically to a person depending on their online usage patterns—is one arena that advertisers will eventually figure out how to do right. The real game these days is in much smaller transactions, like paid search, that is pulling in buckets of revenues for sites like Yahoo and Google and also in online classified ads, where Barry Diller and eBay rule. AOL missed these major trends in its pursuits of giant deals, but it’s still not too late to enter the market in a big way. Online classifieds are still growing, taking market share from newspapers, and it’s a market AOL has largely ignored.
At the annual gathering of media moguls at Herb Allen’s retreat and schmoozefest in Sun Valley, Idaho, in the spring of 2003, Yahoo’s Terry Semel stood up and made a declaration to those gathered that the huge online portal would rule the fast-growing market for making big bucks off searching for information online. He made the first step to delivering on that boast within the same week when he announced that Yahoo would fork over $1.63 billion to acquire one of the leading paid-search companies, Overture. Contextual advertising has become a lucrative arena that is sure to become even more so (and more competitive, too). As the Web business turns back to its very roots and embraces the one basic idea on which the commercial Web was founded—the ability to find everything about anything anytime and anywhere—AOL must be a leader.
Problem: Whither Content
AOL got a lot of press in the spring of 2003 when it announced recent deals with other Time Warner divisions to carry exclusive premium content on the service. That included magazine content, the possibility of an online comedy show from HBO, and other stuff. The idea seems to have gotten out there, unfortunately helped by a vague comment by Dick Parsons, that AOL would rule by creating hits like HBO does.
That’s not entirely true, since AOL and most others on the Web realize the original content game is a questionable proposition for a lot of reasons. These include the difficulty of creating new online material that people actually want to pay for, even as the wholesale illegal downloading of existing content continues. This is all still being sorted out, and will change as broadband usage becomes widespread, but it remains a costly and uncertain endeavor. So far, very little in online content creation has been lucrative, despite constant refrains that content will inevitably be king. For now, it’s much less lofty royalty in the Web realm.
Solution: I think I’m pretty safe in predicting that there will be no hit like the Warner Bros.–produced television hit Friends on AOL, or anywhere on the Web, for many years to come (if at all). I’m also certain that AOL shouldn’t even bother to attempt any major content initiatives, even with the able help of proven creators like Warner Bros. and Time Inc. Making special content available is an okay strategy, as long as it does not cost AOL too much. But it doesn’t seem to be what users really want from their online experience.
A better bet seems to be the kind of event- and news-driven packages of content—created by media professionals—that is being successfully sold by RealNetworks and Yahoo. AOL has been trying to get into this arena with its very admirable “First Look” at music and movies, but it’s still not clear that this is why anyone signs on to AOL. With so much free information available on the Web, AOL’s power to point and add context and navigation seems a more useful direction. For Time Warner divisions, of course, using AOL seems like a good strategy for now, but its efforts will remain more glacial. “I don’t have wild expectations,” said Time Inc.’s Editorial Director John Huey about the magazine unit’s digital aims. “It will be a part of our business, but I’m not sure it’s a big part.” Huey’s right: Someday the Internet will surely kill the media company’s businesses, just not this week.
Problem: Need for Personalization
For years, AOL has tried to add personalization features to its offerings, but it has done it in such a half-hearted and thin-featured way that all efforts have been dismal. More personalization is definitely needed, as evidenced by the popularity of such tools on pretty much every successful Web site on the planet. One of the great things about the Web is the ability individuals have to program for themselves, since presumably no one knows you as well as you do. AOL has long gone against the grain by foisting the same Britney Spears–heavy front screen on everyone who passes through its service. It’s recently tried to offer a handful of still-strict screen choices designed by AOL, but that’s not the same. I am certain AOL has done 237 studies on how people prefer this mainstream approach, but I’m going to have to disagree. They don’t.
AOL’s new “QuickViews” feature in 9.0 is a step in the right direction, allowing members to create menus of information that are easily accessible as the cursor rolls over different icons of the main scree
n. And there are other tools coming that allow more user control, although AOL still seems loathe to turn over the keys to the service completely to those who deserve to drive—the customers.
Solution: Let the people decide on what they want on their front screen by allowing them the widest range of choices about what should be featured there. AOL can still control the many offerings of news or colors or weather or whatever, but the user should have much more control over his or her own experience. In this way, AOL can begin to suggest new features that users may never have known about, since AOL has so little information about their preferences. I mean this in the nicest way, but AOL programmers are inexperienced and not media savvy enough. By giving this power to users, it solves a myriad of problems and eliminates Britney from the lives of those who are less interested in her. Or not interested in her at all. “At some point, there has to develop an editorial culture at AOL,” said Time Inc.’s Editor-in-Chief Norm Pearlstine. “Although I am not sure anyone knows what that means.”
I’ll tell Norm what it means—only each individual customer of AOL can define the editorial culture of the company for himself or herself. When trying to figure out how to reinvigorate the service in 2002, some executives pondered whether or not AOL had a definitive “voice” like the increasingly popular conservative ranting on Fox News. AOL, in fact, has tens of millions of voices and should keep it that way. Searching for a common editorial mindset seems like a giant waste of time for a place as disparate as AOL.
Problem: Will People Buy Premium Services?
Over the years AOL has basically sold one product for one price—its bundled online service and access package. Now Miller and others are talking about disaggregating the service, selling bits and pieces of it—such as an offering that provides special phone management—for various prices. While it’s an idea that pretty much every other competitor has been rolling out for more than a year, it’s still an unproven product strategy that might be more trouble than it is worth. AOL users are used to buying a single product and these extensions are risky, because they provide customers the opportunity to reconsider the worth of every part of AOL.
