@ UBS Media Week: AOL’s Armstrong: New Ad Platform Rolling Out in ’10; Ad.com Not Being Abandoned


When AOL (NYSE: TWX) CEO Tim Armstrong arrived at the company several months ago, he discovered its content and ad systems made up of a patchwork quilt. In a Q&A at the UBS Media Week conference a day before the official spinoff from Time Warner, Armstrong provided an overview of some of the goals he had coming in and how his plans have developed. One of the ways AOL had lost its way was that it wasn’t maniacal about “piping,” having a seamless system for content and ads, as opposed to the streamlined, distinct set of pipes that governed distribution at Armstrong’s former employer Google (NSDQ: GOOG). “I saw that AOL had Platform-A, which was made up of several companies it had acquired over the years. There were dozens of content management and ad systems and it was hard to connect all the parts. That was one of the first things we had to address.”

Other plans include working on a new platform that will make it easy for marketers to buy ads, such as allowing them to use credit cards to purchase inventory. It will be rolled out sometime next year.

Armstrong was asked about JP Morgan analyst Imran Khan’s report that AOL would soon cease selling inventory from Advertising.com. He said that the report was misconstrued and that the company would just shift emphasis toward premium pricing. However, he stressed that AOL was not abandoning Advertising.com, which has served as AOL’s advertising anchor for years. “Ad.com is an incredibly important part of the business. What the analyst meant to say was that we were going to emphasize premium pricing. We were selling Super Bowl inventory for decidedly non-premium pricing. That’s something that has to change.”

Returning to an earlier theme of the conversation, Armstrong said the company’s communications business, which includes AIM and e-mail, also needs some cleaning up. “The communications business was a recipient of problems with execution at AOL. We lost some AIM users when AOL created the People Networks business, which tried to force AIM users into Bebo.” He added that Brad Garlinghouse, president of Internet and Mobile Communications, will also work on cleaning up the e-mail system, which has about 18 million accounts. That part of the business has not been served well by the use of ads in e-mails. Given Garlinghouse’s focus on mobile, those applications will also be structured in a way that relates best to portable devices.

So how should the new AOL be judged? AOL’s old metrics were pageviews, Armstrong said. “That didn’t work. Expect to see growth in the display business. Long term, we want AOL to be a cash-generating business.” In the end, if the metrics aren’t there — even for Patch, the hyperlocal site network Armstrong personally invested in before AOL bought it — “we won’t be spending money on it.”

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