New AOL chief has grand plan

Looking to make company the Web content king

Like a certain president, Tim Armstrong has just completed his much-hyped first 100 days on the job. And in similar fashion, now the new AOL CEO faces the daunting task of rebuilding a beleaguered organization.

The former Google sales chief has begun blueprinting an ambitious agenda for AOL, the frequently troubled Internet pioneer. And while some paring down is taking place, Armstrong is swinging for the fences. His vision -- which he plans to articulate starting this week to AOL's employees and partners -- is nothing short of making the company the world's top producer of original content online, as well as its biggest provider of display-based advertising. Oh, and he wants AOL to both own Web communications and corner the nascent online local ad market.

"If you really want to break down the key strategy points, it really comes down to content, ads, local and communications," said Armstrong. That's not a small undertaking, and at first glance doesn't seem very different from AOL's recent three-pronged strategy of MediaGlow (content), Platform A (sales) and People Networks (social/communications). But it's one that Armstrong believes the company is well-positioned to handle.

"AOL is not 10 people in a garage," he said. "We have enough manpower and focus to actually do multiple things. I think we are focused on a very limited set of things than what was focused on in the past."

So what's going away? Essentially Bebo, last year's much-derided $850 million acquisition. Bebo will officially be placed in AOL Ventures, a new unit that serves as a mini-incubator for AOL's lesser acquisitions and smaller properties in search of outside investment.

The strategy of shoving Bebo together with AOL's ever-popular AOL Instant Messenger platform never worked, Armstrong explained. However, AIM, along with ICQ, AOL Mail and other communications platforms -- though never major revenue generators -- remain key to the company's future, he added.

One recent strategy AOL does not need to alter is MediaGlow, its fast-growing collection of niche content sites, many of which are staffed by professional journalists. Together, MediaGlow sites reached 75.4 million monthly unique visitors in June, up 5% versus last year.

Producing content that attracts users is not a problem for AOL. It's ad sales -- an area that Armstrong realizes he's got to fix probably before anything else. Buyers complain that AOL's sales structure isn't clear. It's why Armstrong brought on ex-Googler Jeff Levick in May to serve as president, global advertising and strategy, dumping former sales head Greg Coleman after three months. "Levick is smart, and he seems to be good at process and operations," observed Ed Montes, regional manager, Havas Digital North America. "But I'm not sure that they are clear in the market right now."

AOL needs to be. It seems as though the previous regime had bet too heavily on the Platform A mega-ad-network model.

"The strategy when I got here was to take all of AOL's inventory and run it through Platform A," Armstrong said. That works if Coca-Cola wants to blast a message all over the place, but not so much if it wants deep brand integration on specific properties, and not to mention what that does to premium pricing.

As a result, "monetization has not just trailed traffic, it's gone down," said Armstrong. "And monetization has gone down because they'd taken it from a monetary proposition with advertisers -- which was deep brand integration with slightly higher prices -- to everything being priced as a network. There was fundamentally a mechanical issue in the way advertising was sold here that we're changing for both kinds of advertisers."

How exactly will ad sales be structured? Armstrong would only hint at some sort of bifurcated arrangement. As for AOL's plans to push into nascent territory like local and self-service ads, as well as its bold desire to serve as the backbone of Web display advertising, to some, it sounds like AOL is angling to be the Google of the display world.

"Google's been a very successful company, so we'll take that any day," he replied. He's less specific about just how big a player AOL wants to be in handling display advertising for sites outside its purview -- but he does tout the company's third-party ad serving platform, Adtech. "I wouldn't say our aim is necessarily to become a total tech solution for display&hellipBut we feel like we can do a good job of serving the vast majority of the display marketplace." Of course, Microsoft, Yahoo and Google feel the same way.

Despite the urging of some analysts, Armstrong definitely refuses to change the AOL brand, which he believes carries more strength than he first thought before coming on board. "There is a much different view of AOL in the business press versus AOL in the consumer marketplace. We are going to make our products meet our brand ... until people look at our brand in the light that it should be shown."

Yes, Tim can?