Summary:

AOL Command Structure: Internal Memo From Chairman and CEO Jon Miller

Date: Wed, 20 Sep 2006 14:27:55 EDT
Subject: Organization Update fro…

AOL Command Structure: Internal Memo From Chairman and CEO Jon Miller

Date: Wed, 20 Sep 2006 14:27:55 EDT
Subject: Organization Update from Jon Miller
Hi, everyone.

On August 3, I told you that by mid-September I’d be able to share with you the elements of an organizational structure to support our new strategy and business model. Since then, I know many of you have been awaiting news on how the organization would be shaped, because aligning it to the strategy we’re pursuing is so vital.

Our last significant organizational changes were in November 2004, when we created four business units: Access, Audience, Digital Services, and AOL Europe. It is my belief that this structure served us well but no longer reflects what we are doing. Starting last month, our whole company became an “audience” business. Moreover, our international aspirations go far beyond Europe, as important as that market is for us. Therefore, the four large business units that defined us for the past two years will be replaced by smaller, nimbler product groups with more authority and greater accountability.

It’s my view, and I know many of you share this belief, that we haven’t completed one of the most important tasks we’ve faced, which is ensuring that we are a product-led global business, with our leaders given sufficient scope to design the products consumers want, and then to get those products built and adopted. It is true that when we last changed the organization two years ago, we made progress breaking down the matrix, but we did not, in my opinion, go far enough. Now we will go further.

It is our intent to have product leaders become general managers who will directly oversee product technology and development, QA, business development and distribution, as well as product adoption – and then be held responsible for the results. The products that they design and launch must be created with both domestic and international users in mind, and be capable of being used on multiple platforms. These leaders will have to operate within the larger structure in which corporate functions such as Legal, Finance, and Corporate Communications play an important and necessary role.

Let me say up front that as we shift further to a diversified advertising-based business model, we will still have a centralized organization overseeing the many dimensions of AOL’s “monetization machine” — brand and display advertising, performance-based advertising, for our multiple brands as well as third parties. Product managers will be judged on how their products are embraced and used by consumers, but the many dimensions of generating advertising revenue will continue to be centralized.

Even where roles might seem similar, we’re changing the nature of what it means to be a product manager at AOL. You may recall two years ago, when we announced the new organizational structure, we deferred for months the announcement of how technology resources would be applied to the business units. We started to move dedicated technology resources into the business units but then did not move the people directly in line with the product organizations. That was a mistake, which we will now correct. In the weeks ahead, with the complete support of John McKinley, we’re going to complete the mission we began to move technology resources into the product units. This is a fundamental shift in how we operate our business.

Even as we seek to have product units with greater autonomy, having company-wide oversight and shared services will still matter. The recent Search data debacle is a prime example of why, even with the best of intentions, without proper oversight, costly mistakes can be made. There are, and always will be, corporate functions. Even though, for example, we may have attorneys working within these product units, as well as people dedicated to financial matters, we have only one Legal department, and a centralized Finance group. HR supports the entire company. Corporate Communications has the responsibility to manage messages for the company as a whole, at times mediating between the needs of different organizations.

It should be clear that one, very positive thing that has changed here is that AOL today has only one strategy, and it supports our singular mission – to serve the world’s largest and most engaged community. We no longer have conflict among multiple business models, wherein the resources and messages designed to support our “Access” business compete and, in some cases, negate the resources and messages meant to support our “Audience” business. I believe the changes announced today will go far toward helping us fulfill a singular strategy and a noble mission.

Last week, Ted Leonsis announced that, beginning in January, he will relinquish day-to-day management responsibilities, even as he stays deeply involved in our business. Some of Ted’s direct reports will report to me, beginning in January. In the next two weeks, you should expect communication to follow from these executives, and others who report to me, on the makeup of their teams. Not every piece is yet in place, and Ted and I, along with my direct reports, are going to thoroughly review the talent we have available to ensure a fair interview and selection process so that we put the best-qualified people in the right positions.

In announcing the executives who will report to me, some in similar roles, some in new ones, I want to begin with Joe Redling. Joe is one of AOL’s most capable executives and has led both our centralized marketing organization as well as the Access business. This is a moment to acknowledge that Joe and the Access team were asked to deliver results in the face of very strong business trends, which made their jobs so difficult � and the financial results they delivered so impressive. Joe’s contribution, and that of the Access team, has been extraordinary and enables us to transform our business. Joe has now accepted the responsibility for a broader portfolio of three key initiatives that directly address our future — including our international businesses, what we do in the area of mobile technologies, and the way we manage our relationships with consumers who use our services, both paid and free.

As many of you know, Ted has been both the champion and executive sponsor of efforts we’ve commenced to increase our global presence as an advertising-based business. Joe will lead new efforts to expand our presence internationally. International expansion as a Web services company is a prerequisite to our fulfilling our mission. Philip Rowley has done a superb job in building our businesses in the U.K., France, and Germany, and Karen Thomson is expertly managing those businesses through a complex transformation. I’ve asked both Philip and Karen to report to Joe. Philip will focus on new businesses in Europe and other ways by which AOL can expand its presence internationally, while Karen initially will concentrate on growing our Web audience in France, Germany, and the UK.

We expect to announce a new International structure soon. In addition to Philip and Karen in Europe, we will announce leaders to oversee our efforts in North and South America, as well as India and other Asian markets. This is not a reprise of what we used to call AOL International; this is an effort in which AOL will expand its worldwide presence, generating advertising revenue with both English- and local-language portals and other sites. The deals we’re announcing with partners in Europe to make the transition from primarily an access business to a Web business illustrate our new approach. Joe will be updating you on this soon.

Mobile is an area in which we have not previously had enough AOL-wide focus and investment. Mobile is not simply a single great product like T9 but is a platform that, over time, will be as important as the PC. Joe will assume responsibility for this emerging platform, which is likely to play an important role in our presence internationally. (For millions of people in the developing world, the Internet is primarily accessed through mobile devices.) While we expect product managers to design products that can exist on multiple platforms, we believe that there should be a centralized mobile group to drive these activities under a broader mobile strategy. Rather than spreading resources for mobile around the company, this is one area in which we will centralize product development for now, for two reasons. First, creating multiple mobile units throughout the company would delay our being able to make progress in this area. Second, we don’t currently have the scale of resources we would need to split them up. It must also be said that in addition to expanding AOL’s product line onto the mobile platform, we will be active in acquiring and developing new mobile applications and technologies.

A third area that Joe will oversee is how we will manage our relationships with our customers � those who subscribe to our paid services, and those who use our services for free. Once we have acquired either a subscriber to a service, or a registered user, we will need to provide them with superior customer service. The management of millions of customers’ experience, of course, has been the responsibility of Member Services, and the current Member Services organization will be part of this new business unit. But this is a broader customer management challenge, for it is our desire to delight all of our users, whether they are paying for a subscription service or simply using our products.

As I mentioned, beginning in January, some of Ted’s team will now be reporting directly to me. Jim Bankoff will report to me, continuing to be responsible for AOL’s programming initiatives, as well as AIM. Because AIM Phoneline emanates from the AIM platform, Voice now will move under Jim. Jim will have the dedicated distribution, adoption and technology resources to be able to manage his portfolio of programming initiatives, from instant messaging to social networking sites such as AIM Pages. Developing a new publishing and content-management system is a priority for the company that Jim will spearhead.

Kevin Conroy will report to me, with responsibilities for AOL-branded products such as AOL.com, AOL Mail, Storage, and Video, as well as the AOL client. These AOL-branded products will be developed and distributed under Kevin’s leadership, with both dedicated technology resources and dedicated marketing, and importantly, Kevin will be responsible for user adoption, business development, and distribution. In the new organization, we will not have a corporate CMO function, but we expect that if marketing resources are needed to promote the AOL brand, Kevin’s team will provide them.

Mike Kelly will report to me, continuing to run our advertising sales organization. Mike and his team have produced great results creating one of our industry’s premier advertising sales networks, and together with our leading third-party advertising network, Advertising.com, and the efforts we have underway with our partner Google, we are able to offer advertisers a complete solution to their needs. A central reason we have had the confidence that we can move to an advertising-supported business model is because of the incredible results posted by Mike and his team. While product managers will have expanded responsibilities, crucially, it is the centralized sales organization that will work with advertisers and in so doing, generate the revenues. Mike will continue to be responsible for Search, and we will place even greater emphasis in the months ahead on local-based services.

In the next few weeks, Joe, Kevin, Jim, and Mike will be announcing details on how their teams will be organized. Our Corporate structure will remain largely intact, with Finance, HR, Corporate Communications, Legal, the CTO position, and importantly, the Office of Diversity, continuing to report to me. But I would like to call out a few important changes in Corporate as well.

As you will remember from the communication I sent out in August following the release of Search data, we are determined to prevent any future such breach of consumers’ trust in us. Ted and I have asked Randy Boe to move into a new role overseeing a unit dedicated to aspects of how AOL interacts with and protects consumers. Randy will report to Ted, in Ted’s capacity as Vice Chairman, because ensuring that AOL is delivering on the commitments we make to consumers is something Ted is determined we get right. We envision that elements of Integrity Assurance will move out of the Legal department and into this new unit, and we expect Randy will soon announce our first Chief Privacy Officer, who will report to him. His group will also ensure that our software meets the highest standards of transparency, with consumers always knowing what to expect from us.

With Randy moving into this new role, we expect to announce a new General Counsel next week.

As you know, Steve Swad has had, in addition to Finance, responsibilities for Corporate operations, M&A, and Corporate Strategy, and in the weeks ahead, I will tell you more about additional responsibilities we expect Steve to take on.

Many people reading this will find that their reporting structure has not changed. For some, roles and responsibilities are less clear, and so we will move as quickly as possible to announce new executives at the next line below those announced today. As mentioned earlier, we are in the process of a serious talent review to ensure we have the best executives running our operations. Even without all of the answers known at this time, I believe it is important that I communicate to you today the top-level organization, and on how we are changing so as to be able to execute on our strategy.

In the weeks since we announced our new strategy, we have seen terrific results. I am greatly looking forward to being able to share our progress with you when we announce third quarter earnings in early November. For now, let me say that I believe we are gathering momentum, and the executive announcements made today will accelerate this. We will make progress becoming a global product-led organization. AOL is changing, and these are exciting times. Please join me in wishing well all of those who comprise our senior-most management.

Sincerely,

Jon

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