AOL To Shutter a Slew of Products

While researching the AOL blogs budget cuts story this afternoon we stumbled on a much bigger story unfolding at AOL. The company is planning to shut down a number of non-performing products, say people with knowledge of the situation. The products, which include Xdrive, AOL Pictures, Bluestring and MyMobile, all fall under EVP Products and Marketing Kevin Conroy.

In an email to his staff on July 14, Conroy talked about the upcoming product reorganization. Some products will be shut down. Others will simply be ignored for the most part and fade into obscurity over time. The future of another slow-growing product under Conroy, MyAOL, is also in question.

Conroy, who joined AOL in 2001, reports to President and COO Ron Grant. His peers include:

• Joanna Shields, EVP and President of People Networks. Shields is the former President of the recently acquired Bebo, and controls that property as well as AIM, ICQ, Goowy and Yedda.
• Bill Wilson, EVP Programming. Wilson controls AOL’s content sites, including the blogs, News, Movies, Lifestyle, and Celebrity Gossip. He’s seen as a rising star at AOL, with many of his properties growing rapidly.
• Ted Cahall, EVP Platforms and Technologies. Cahall owns search and provides engineering support to the other groups.
• Lynda Clarizio, EVP and President of Platform A. Calrizio runs the advertising arm of AOL.

Conroy has plenty of high profile properties left under his control, but insiders are wondering if each of them really belongs under one of the other execs’ groups. AOL Mail, for example, fits in naturally with social networking and instant messaging under Shields. MyAOL and the AOL client may be better under Wilson’s content group. The toolbar, Userplane and Truveo could all fall under Wilson or Cahall.

The real problem is that Conroy, unlike his peers, lacks any real product direction or mission. He has a hodge podge of properties and services that are either being shut down or really belong somewhere else.

Update: Below is the full text of the email AOL EVP Kevin Conroy sent out to staff on July 14, outlining the reorganization of his product groups and announcing the “sunsetting” of XDrive, AOL Pictures, MyMobile and Bluestring.

At the start of this year I committed to providing frequent updates on the state of our business and our plans going forward. Additionally I have said that we will continue to evaluate our product portfolio and discontinue projects when necessary in order to focus our resources in the right areas. In that spirit, I want to give you an update on the essentials project, an exercise we undertook to help our organization focus on the things that will most effectively contribute to the financial health of our company.

There was a time at AOL when the strengths of our aggregate portfolio of products more than compensated for the weakness of an underperforming product. The realities of the industry and market shifts in online advertising no longer make that possible. Simply put, every product makes a direct impact on our bottom line. With two quarters behind us, it is fair to say that results across the AOL products team have been mixed. And while I expect 2008 to finish stronger than it started, the current situation is that some of our products are doing very well while some continue to struggle. Being responsible to our company and its financial goals means taking a very hard and honest look at each of our products and making the tough business decisions necessary to ensure the long term viability of AOL.

The changes described below are in no way a reflection of the hard work and creativity of the people who built and maintain them.

- Personal Media: Bluestring, Xdrive and AOL Pictures will be sunset. These consumer storage products haven???t gained sufficient traction in the marketplace or the monetization levels necessary to offset the high cost of their operation. We have found that building media management applications within the context of a social experience is a more rapid and effective way to grow the business. For example, today the Bebo audience is uploading over three million photos per day. To effectively grow the XDrive online storage business we would need to focus on subscription revenues vs. monetizing through advertising revenue, and this business model is not in strategic alignment with our company's goals. We are exploring plans to migrate our users assets to ensure the best possible transition experience.

- MyAOL will complete its HP deployments by the end of October and will transform the MyAOL platform from proprietary to industry open standards. The team will provide ongoing platform maintenance support for our 70 plus HP partner sites.

- Mobile: We have decided to halt further investment in AIMWorld and will sunset MyMobile next year in order to focus on our core revenue producing products (ie, mail, messaging, portal and mapping). Along with these core products we will focus on developing for key devices like the iPhone and the Blackberry. We will also leverage open services through OpenMobile to engage third party mobile developers in order to create new applications and experiences, which will expand distribution without additional internal development costs.

- Video Portal: The AOL Video Portal has seen significant success in growing organic search traffic to about 15 million SEO referrals per month. That said, there is an opportunity to align resources throughout the company and grow advertising revenue by merging the video portal with AOL Programming Video Experiences to deliver a higher value product inside of the AOL Programming channels. The work to merge the two products is currently ongoing and will be completed in early Q4.

We are also aggressively seeking revenue growth opportunities and have identified the following areas as opportunities:

- Toolbar: Accelerate the distribution and monetization of toolbars to drive revenue derived from search and recirculation.

- Desktop: Develop and launch desktop software promotion push to drive increased ROI through the acquisition of new free software users.

- Mail: Increase effective monetization of mail while pursuing distribution opportunities to grow audience and engagement. Drive growth though new ad inventory (Quigo, etc.), ad packaging and sales strategy development, affinity and cobranding partnerships and open services.

- Truveo: Monetize the over 50 million UVs Truveo receives monthly through our O&O site and APIs through a phased approach including banner advertising on the site and monetization of the APIs.

The plans we are putting into place strengthen our position in the industry and improve the finacial health of our business. The evaluation of our product is based on ongoing monthly reviews of each product's progress compared to our 2008 goals and the market outlook. It is fact based, not arbitrary. It goes without saying that we are all working in a dynamic and challenging industry, but I firmly believe that we can succeed by focusing on reveue opportunities and managing our costs. I hope that you will continue to stay focused and deliver your best work as we strive to continue the transformation of our company.

Original post

Comments

[Terry S]

Michael,

I always enjoy your commentary and I read your articles regularly. In fact, I have you marked so I see all of your work when published.

In light of your knowledge and coverage of AOL and their continuing struggle to keep pace with a changing online environment, I was wondering if you would mind providing some commentary on another article that appeared here a while back regarding Platform A. Keep up the excellent work!

Why AOL's 'Platform A' May Not Make the Grade

by: John Harris posted at SeekingAlpha.com on: June 18, 2008 | about
stocks:

MDVX.OB / TWX

Back in September, AOL (TWX) today announced a series of changes it was making to position the company as the world's largest and most effective advertising network, building on its industry-leading Advertising.com network and the recent acquisitions of TACODA, Third Screen Media, Lightningcast, Adtech, Quigo and Bebo, collectively purchased for what must be close to $2 billion dollars. The realignment marked the final stage in AOL's transition from an access business to a global, ad-supported Web company.

The new entity, called Platform A, says it is offering advertisers
access to the most sophisticated targeting and measurement tools
available in the marketplace across Platform A's unmatched network
of third-party sites, as well as AOL's owned and operated sites.
Platform A is said to already reach more than 90% of the domestic
online audience, according to comScore Media Metrix. Platform A
builds on the success of Advertising.com, which operates the largest third-party display network, and integrates behavioral targeting leader TACODA, Third Screen Media, which operates the largest mobile media network, market leading video ad serving platform Lightningcast, and ADTECH's global ad serving platform.

In recent weeks, the company announced plans deploy Tacoda's
technology across the whole Platform A network. In an article
written by Fred Aun published at Clickz.com titled "AOL's Platform A
Integrates Tacoda Across Network" Platform A President Lynda
Clarizio, said players in the online ad industry are now insisting
on scale and precision with consumer targeting options. She said the use of Tacoda's BT technology will help Platform A satisfy that
demand.

"We'll replace all of Advertising.com's existing behavioral
technology with Tacoda's behavioral product," said Clarizio. For re-
targeting campaigns, Platform A will continue using Advertising.com
Advertiser Leadback technology and migrate Tacoda Encore clients to the Advertiser Leadback platform, she explained. Clarizio said the
integration gives Tacoda the full benefit of reaching all of
Platform A's 180 million unique visitors, representing 91 percent of
the U.S. Internet audience. She said she considers Tacoda to be the industry's best behavioral targeting technology. I guess that makes sense, they did pay David Morgan and his team $275 million after all for it.

It all sounds great doesn't it? Ah yes, but Ms. Clarizio failed to
mention a potential large problem that could literally prove to be a
show stopper. Tacoda is being sued for patent infringement by a
company who appears to be the rightful owner of the "patented"
technology she herself refers to as "the industry's best behavioral
targeting technology".

That's right! It appears Tacoda, said to be acquired solely for
their technology and not their people, owns not a single issued
patent on the technology they sold to AOL! They must have seen the value in patenting it since it is "patent pending" but you obviously can't obtain a patent for technology someone else patented many years ago. This `already patented" technology is the exact same technology that they intend to make a cornerstone of Platform A, allowing them to monetize AOL's $2 billion dollar plus investment. I know, say it isn't so!

It get's even better, according to Modavox's (MDVX.OB) just released filings, they just sent a Cease and Desist letter to AOL, LLC President & Chief Operating Officer regarding Ms. Clarizio's exact stated plans to utilize Tacoda across all of Platform A.

On May 16, 2008, Modavox served a Cease and Desist letter to the
AOL, LLC President & Chief Operating Officer. We advised of the
possible expansion of our current action against Tacoda to include
AOL, LLC if they intend to utilize the Tacoda Advertising process
throughout the AOL, LLC "Platform A" as described in recent
publications and news releases. We have informed AOL, LLC that a non-exclusive license to the patents-in-suit are available; however in the absence of a license AOL, LLC's published intention to make the Tacoda solution available across the Platform-A Network will in fact infringe upon well identified patents. As of June 1, 2008, the
matter remains unresolved.

So I ask a couple very simple questions of Ms. Clarizio and Mr.
Falco. In light of the importance of Platform A to AOL's future, the
fact that at least a couple billion dollars has likely been spent in
it's formation, the fact there have been suggestions it will be spun
off into it's own publicly traded company, and the fact Platform A
is clearly predicated and reliant on Tacoda's behavioral targeting
technology to monetize your audiences through online advertising,
what if you lose this lawsuit? What if one of your competitors buys
this small company and leverages it against you?

Until this important issue is resolved, it appears AOL's Platform A
may not make the grade.