AOL takes cue from TV advertising

With the introduction of AOL 8.0 next week, the beleaguered online unit of media giant AOL Time Warner will emulate a strategy that is common in the television industry--selling advertisers access to audiences based on peak viewing times. By offering time-targeted ads, known as "dayparts," as well as content geared toward a daytime audience, the Dulles, Va.-based company hopes its networks will appeal to advertisers that are more inclined to spend money on traditional media than online.

The move comes as AOL is under pressure on several fronts. Subscriber growth has stalled and a two-year decline in Net advertising shows little sign of improving. Meanwhile, its accounting is being scrutinized for evidence the company has improperly inflated revenue, and several top-level executives have departed in recent months.

With the new sales plan, AOL aims to further ingratiate itself with traditional advertisers, with the payoff being better access to ad budgets allotted for television and the ability to increase rates. The company recently lowered ad rates to levels it called "more grounded in market reality."

"It would be neat to have the Internet considered like other media, so as to tap into budgets that aren't earmarked for the Web," said Michael Barrett, AOL's senior vice president of national advertising sales, adding that new programming in AOL 8 is key to such an approach.

The attention on advertisers follows recent moves by AOL to retain and attract subscribers by tapping the vast film and music properties of Time Warner.

"If programming brings eyeballs, eyeballs bring advertisers and advertisers bring a scarcity of inventory," Barrett said. "One would hope that it has a positive impact on pricing and sales."

The company needs help in both areas. In the last year, AOL's cash cow, subscriber growth, has slowed dramatically. Just 492,000 new customers signed up in the second quarter, compared with the 1.3 million who were added during the same period in 2001. With customers paying $23.90 a month, the drop-off means AOL has missed out on hundreds of millions in potential revenue.

The advertising side of the ledger is just as bleak. In the second quarter, advertising and commerce revenue at AOL tumbled 42 percent to $342 million.

In response, the company is ratcheting up the service with exclusive content and selling traditional advertisers on measurements they can understand. Although AOL is late in adopting such a strategy--some smaller sites have sold time-targeted ads for months--its size could lend credibility to the practice and attract new, large advertisers.

Web publishers including The New York Times, USAToday.com and Yahoo are already selling advertisements by time of day; and some have even started tailoring content as well.

This summer, five major Web publishers, including CBS MarketWatch, Weather.com and CNET Networks, publisher of News.com, aligned to sell ads that span all of their sites, helping advertisers target at-work audiences. AT&T's mLife campaign was the first to sign on, with the aim of reaching business executives during the workday.

In another example, financial Web site CBSMarketWatch sold Budweiser exclusive sponsorship of its pages during "happy hour," at the close of the business day, when people may be headed for a bar. Online portal Yahoo has also hawked daypart advertising for the last year.

"It's catching fire," said Michael Zimbalist, president of the industry group Online Publishers Association. "The Internet has evolved from a print model, with units on pages, to more of a broadcast TV model, where the time of day dictates the type of advertising to be displayed rather than the physical location on a page."

As part of its plan, AOL will push certain content to the forefront of the online portal at desirable times, much like cable TV does. It plans to introduce more than 45 new "shows" to run throughout the week, featuring news, sports and entertainment. For example, it will air "Morning Money," a personal finance segment that will be broadcast each Tuesday morning. In another example, it will air sports highlights on Sunday nights.

As a result, AOL will be able to determine who is watching and when. And it will be able to sell advertisers an audience at peak times, or in three cycles: from 5:00 a.m. to noon, noon to 7:00 p.m. and 7:00 p.m. to 5:00 a.m. Marketers can also buy a 30-second spot or sponsorship of a show, AOL's Barrett said.

"If you have a defined audience at a defined period of time, you're (able to) say to advertisers that for 15 minutes you're going to reach this many people and this kind of demographic," said Barrett. "This is what advertisers have been asking for." He added that this sales strategy should not undermine the unique interactivity of the Internet, but that it takes the best of the Web and "overlays it with what folks are comfortable buying."