Internet portal still has some fight in it

Amid all the recent headlines about tie-ups and acquisitions involving Yahoo, Microsoft, Google and Facebook, one player continues to look more like a perpetual bridesmaid than bride.

Few could dispute that AOL, the onetime buyer of Time Warner, has become a burr under its parent company’s saddle financially. Q4 2007 results released Feb. 6 showed an array of less-than-scintillating numbers. Division revenue slipped below 10% of the conglom’s total for the first quarter since 2000. Fiscal-year operating profit was just 14% of the total. Display ad revenue gained just 3% for the quarter, to $252 million, and paid search rose only 1%.

Speculation about AOL being spun off, whole or in parts, may yet prove correct. But as other Web players do the courtship dance, AOL hopes to avoid wallflower status by radically reinventing itself — again.

AOL hopes its trifecta of new management, new content and new revenue sources finally pays off.

Topper Randy Falco, a career NBC exec, and prexy Ron Grant, a favorite of new chief exec Jeff Bewkes, took over in November 2006. Bewkes plans to split AOL into two businesses, one for its 9 million-plus dial-up subscribers and the other for ad-driven content, a move that could enable both units of the old America Online to finally be taken off the Time Warner books or else spun off into majority-owned subsids a la Time Warner Cable.

On its consumer sites, AOL has been quietly but significantly changing its approach, maintaining the home page as a useful destination for older auds with affinity for the brand while reshaping its approach to content.

“The marketplace is changing and everyone is seeing quite a bit of fragmentation, so in the past year we’ve really leaned into that by creating a network of sites as opposed to hoping that one portal will save the day,” says exec veep of programming Bill Wilson.

Emblematic of that shift is AOL’s biggest success story of recent years, Created in partnership with Telepictures — the only significantly successful partnership with any Time Warner sibling — the celebrity gossip blog is constantly updated and full of headlines that grab Google searchers, hundreds of outbound links, thousands of user comments. It features just one small AOL logo on the corner of the page.

The approach is also evident in names like Spinner, Asylum, Fanhouse and Truveo, all brands that AOL has launched recently with little or almost no branding from the corporate parent.

Even on more traditional sites like AOL News, the focus is increasingly on blogs, widgets, user interaction and search engine optimization. Users will even find outbound links that send them to pages that don’t start with — a heretical thought just a few years ago.

“It’s more of the Google model,” says Wilson. “If someone comes into, gets five minutes of pleasure, and then goes somewhere else, that’s OK. The goal is to create habituation so they’ll come back on their own.”

AOL has roughly treaded water among users in the past year. Total traffic has been roughly flat for the past year, according to tracker Nielsen/ NetRatings, just behind competitor MSN and well behind Yahoo.

AOL’s new content approach has another big advantage: lower costs. Blogs, syndicated content, and user generated content all come at much lower price than the high-quality original content AOL used to produce.

As recently as a year ago, AOL thought it could stand out by investing in content. Last spring, Falco led a network-style upfront presentation to unveil several original programming events, including a second incarnation of its Mark Burnett-produced “Gold Rush” contest, online reality show “iLand” produced by Endemol, and gameshow “Million Dollar Bill.”

None of them saw the light of day.

Today, AOL has significantly scaled back its original programming investments, with just a few inexpensive series like Moviefone’s “Unscripted,” where celebs interview each other to promote a new film, and AOL Music’s “Sessions” concert series.

While AOL Video has a large and growing library, it consists primarily of viral clips and syndicated content picked up from partners like Hulu, Sony and CBS.

Now the chief problem for Bewkes and his lieutenants to solve is one of morale.

“How do you stop the snowball from rolling downhill?” says a former AOL exec. “If you look at how News Corp. and Disney have executed online and used their Web assets to drive results, Time Warner by comparison seems like this collection of warring republics. They’ve always had problems with synergy. Every division dislikes the others. ”

Wilson doesn’t gloss over the company’s checkered past, but he cites strong traffic numbers and numerous new initiatives to make the case that esprit de corps has returned.

“In the past in trying to appease everybody, we haven’t satisfied the customer as we should,” he says. “The story will get out there over time. … This is not a six-month story. We’re in it for the long haul.”

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