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Fixing AOL's identity crisis

It's going to be a tough slog, but no "Mission Impossible," writes business consultant John O'Brien. The question is whether AOL's management has learned the new rules of the game.

The recent revelations of distress at AOL Time Warner only underscore the frustrating truth still defining this enigma: Since its blockbuster merger two years ago, this combined company continues to be one heck of a property--but one severely burdened by the absence of any clearly articulated future.

How's that for a contradiction in terms? But the contradiction sums up a lot about AOL these days.

Dozens of "experts" are now busy sifting through AOL's garbage trying to uncover additional damning evidence to explain why one of Wall Street's former darlings has fallen from grace. Many are gleefully pointing fingers of blame at the various departed or diminished leaders they once deified. They are wasting their time and soon, no doubt, ours with shrill histrionics, belittling and bemoaning facts that can't be changed.

The grim truth is that AOL's dial-up subscriber growth is slowing at the same time that other providers are gaining early control of broadband subscription users. All the while, advertising spending continues to decline.

If AOL is ever going to secure its future, the company must decide how it will transform itself from a thin-pipe into a fat-pipe company.
The encouraging news is that AOL enjoys an extraordinary--if not intimate--relationship with consumers. It commands the most loyal subscribers in the Internet world, enjoys an awesome brand name, and logs more daily traffic than any rival by a long shot. What's more, AOL can tap into the talent of an exceptional worldwide technical infrastructure.

But if the company is ever going to secure its future, AOL must decide how it will transform itself from a thin-pipe into a fat-pipe company. Notice I didn't say from a dial-up to a broadband company. Focusing on the technological aspect of connectivity diverts attention away from the more basic issue of why users connect, not how.

AOL also must figure out how to become more efficient at bringing together buyers and sellers. That means finding a way to resurrect advertising revenue. Even though its advertising business contributes a fraction of the revenue AOL realizes through subscriptions, Wall Street views this as the important growth indicator. For that reason alone, reviving its advertising business is crucial to AOL.

What is AOL?
The challenge is compounded by AOL's larger identity crisis. Should it provide high performance, broad reach and integration to a relatively small number of national or international commerce partners? Should it instead focus on moderate performance, limited reach and integration?

AOL must more clearly identify and quantify the number of users who fit an advertiser's prospect profile so it's possible to specifically target them. That means finding a way to convince users to fork over their personal information. A touchy issue? Not really: Users will share their personal information but only in return for tailored content, including ads. They must be assured vendors will not simply shove ads down their throats. The quid pro quo is a relevant online experience.

Elsewhere, AOL will need to design ad formats that include more multimedia and interactivity, thus allowing advertisers to make online use of their offline creative work. In some cases, this may compete with--or even supplant--editorial content. At the same time, AOL needs to come up with credible tools advertisers can use to measure the effectiveness of programs they run online. Finally, AOL must deploy its technical might to enable sellers to create and nurture personal relationships with buyers.

The good old days when AOL made the rules and set the standard is now ancient history.
Most of the company's best prospects have little desire to transform themselves. Some even find the notion arrogant and insulting. That means the onus is on AOL to get humble and better understand how to fit into clients' businesses--not the other way around. To put it simply, AOL must get a lot better at customer relationship management.

Despite all this, AOL remains a company that employs lots of smart people with the capacity to accomplish great things--assuming there's the organizational will to carry through. So, can AOL pull it off?

The good old days when AOL made the rules and set the standard is now ancient history. AOL is a relatively new kid in an established--and often tough--neighborhood with companies that have little need for it or the media it represents. In order to fit in, a more humble AOL will have to learn to play by their rules. If it does, the future could be very bright indeed. If not, my collection of CD-ROMs from AOL is destined to become a collector's item on eBay.