March 23, 2006

AOL: Why we will win, pt 1

Carl Hutzler's recent post got me thinking. I agree strongly with the contents of his message, though I think it also requires burning the candle from multiple ends.

Below are my speech notes from one of my All Hands presentations in the second half of last year (2005) - its a little out of context today, but I still thought it worth sharing.

Why AOL will win...
3) We have scale.
We have scale of audience, infrastructure, and marketing. 110M out of 160M or so Internet users in the US touches an AOL, Inc website (not counting TWX in this). And, our infrastructure is built to scale: no else could have pulled off Live8, for example - even Akamai's edge Network isn't in our capacity league. And its not just technical scale - we're a marketing powerhouse. We cycle [EDITED FOR PUBLIC CONSUMPTION] out of [EDITED FOR PUBLIC CONSUMPTION] households in the US through our acquisition channels EVERY YEAR. And that
scale is relevant.

2) We have engagement.
More than half the Internet population in the U.S. launches one of our core desktop products alone - other than Windows, Office, and Solitaire (seriously) I don't think anything or anyone comes close to our usage. Our ENGAGED user base dwarfes the total OS X and Linux user bases (combined). People check their mail, instant message, and browse through our content - they are an ENGAGED audience that we can and are going to do much better serving (and therefore, valuing and being valued by) in less constrained, artificial ways. And
engagement counts.

1) We have a great brand.
People KNOW AOL. Early on, when I first started at AOL, I had argued we should milk the existing brand and move everything onto another marketing platform (WinAMP was my suggestion - think people would have checked out WinAMP Pictures, for example? Another thought I had was the "@aol" brand, as in "Radio@aol"; mostly I like the double entendre of "IM@aol" :D) - but I was wrong. There is huge, real value in a well known brand. That brand may stand for "Dumbed down Internet" to a lot of people today, but the equity in our brand, which is JUST as relevant today is it ever was, is about democratizing the Internet: taking transformational technologies and re-imagining them such that they are more readily consumptible, by novice and power users alike.

Moving that brand is a HUGE asset for us - and I'm encouraged because though we may not yet have a vision of where we should end up EXACTLY, we do know that its THATAWAY, and we've been moving steadily and strongly in that direction for the last 18 months.

[Continued in Part 2: "Why we won't win"]


Anonymous said...

on the flipside, AOL does have a bad rep as well - With users who have had some bad experience or with the client or, software that was unwittingly downloaded or billed for connectivity that wasn't transparent.
Its not a tech giant though it could be for the very reasons you mention. You got the people, brains and infastructure. but to the layman it looks like strategy marketing and making partnerships is the way to go.

Anonymous said...

I agree however that is also from a technical standpoint. As anonymous posted we have a dead weight of the "old techniques" behind our marketing, our retention, etc. These are the things that members remember when recommending a provider. "We" (Member services) get told all the time this will be fixed, this will change...but it never does. However when it comes to marketing and retention tactic changes we can spin on a dime.

Not to dwell too much on negatives but this is our albatross. With media and our web properties we definately have the power to would be nice to push it.

Anonymous said...

some fodder for your "why we may not win" post...

AOL risks bottom line in push for broadband
By Thomas Clark in New York
Wednesday, March 22, 2006
Posted: 05:05 PM EST (22:05 London)

AOL, Time Warner (NYSE:TWX) 's struggling internet subsidiary, estimates that it will add 1m subscribers to its US broadband service by the end of the year following an initiative to persuade dial-up customers to convert to high-speed internet.

Jonathan Miller, AOL's chief executive, told FT Deutschland, the FT's sister paper, that the conversion scheme was unlikely to boost 2006 revenues and might lead to lower profits. "This year, we are certainly creating some pressure on the bottom line by this move in the US to broadband. That's a conscious decision. It is a classic short-term versus long-term trade-off."

Mr Miller has been attempting to offset declining subscriber revenues with an increase in advertisements. Last summer AOL revamped its free web portal to offer a similar service to Yahoo or Microsoft's MSN in an effort to boost viewers and attract more ads.

But by increasing the price of its dial-up service to the same price as its broadband offering – about $26 per month – AOL runs the risk of angry subscribers simply quitting the service instead of converting.

Joe Redling, AOL's chief marketing officer, said hopes for a conversion rate of 10 per cent of AOL's narrowband subscriber base from its roughly 13m targeted dial-up users were "running pretty much on what we expected or a little above".

AOL's broadband service, with about 5m customers in the US, has failed to establish itself as a premium internet service while AOL's dial-up service in the US has lost 7m subscribers over three years. By comparison, AT&T had 6.9m broadband customers at the end of 2005, while Comcast (NASDAQ:CMCSA) , the US cable group, was the biggest broadband supplier with 8.5m customers.

Mr Redling said revenue was expected to suffer as the division had factored in a stronger decline of dial-up customers because of the price increase, as well as having to split the subscription fees for broadband customers with its telecoms and cable partners.

According to industry estimates, less than 50 per cent of broadband fees will go to AOL compared with more than 80 per cent of dial-up fees.

Anonymous said...

hmm......"pressure on the bottom-line" is usually eased by major cost cuttings also known as "layoffs". what happens to the "people and their morale" in your equation then Sree? Your competitors Yahoo, Google, Microsoft don't have layoffs....

Anonymous said...

to anon2>>layoffs are probably essential - when things are sooo dynamic. U can't have people sitting around doing nothing... just waiting for work, now can u? IMHO - AOLs internet biz still has to reach some kind of stability and lets see what all this reorg brings.

Anonymous said...

Get back to work and stop slacking.

Sree Kotay said...

Actually, I think the "bottom line" pressure that the move to Broadband will likely cause is *GOOD THING* for the company.

We are HUGELY profitly (nearly $2B OIBIDA) last year, and have been for years. Much better to invest some of that revenue to increase our relevance to customers, and quite frankly, their longevity AS customers.

In terms of layoffs and morale - yes, obviously that's never good. The truth is, though, that has FAR more to do with **TOP LINE** than it does the bottom. As long as overall revenue continues to decline, every major project, program, and budget in the company will be under pressure.

Anonymous said...

One thing about having almost 10 years with the company, one acquires a few historical perspectives on how things can, or should, get accomplished. Ironically, those perspectives can also appear pretty cyclical :).

Centralized vs. decentralized; client-centric vs. web-centric; grass-root vs. top-down; matrixed vs. solid lines; TOM (remember The Optimist Movement?) vs. pep-rallies; divlets vs. lines-of-businesses; categories of excellent vs. spreadsheet line items; laid-off vs. rehired.

And my analysis after all this? They all work! Amazing.

However, one thing has remained constant about getting it all to work through the 10 years: leadership throughout the organization to make the philosophies and personalities gel.

This means technical and business leadership with mutual respect for each other.

Easy to write; not so easy to execute. I remain optimistic and a proud member of TOM--although I think that the card-board cartoon character has been laid to rest (i.e., the one that peppered the halls of AOL years back), thankfully.

That summarizes my ten years. I can now live and retire peacefully.

Sree Kotay said...

eric, I think your point is pretty much right on - most of the stuff that burns time, engergy, etc is just noise. Its activity: and often gets confused with progress.

I have this general theory that people or who good are generally good at everything.

In a similar way, good execution is far more important than a good idea.

Sree Kotay said...

Hmm. I guess my point was: good execution DEFINES a good idea.

Until then, its just an idea (with whatever subjective label you want to apply). It *might* be good, and I'm sure if its your good idea, you can explain why.

Sell books online? Search as navigation? Online auctions between strangers? Television from your computer?

I guess what I'm saying is good ideas are EASY; everybody's got one (seriously). Turning them into something valuable - THAT's worth something.

Anonymous said...

Hmmm --- so maybe we can't after all.? So long Sree

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