Ted Leonsis is the Obi Wan/Professor X/Gandolf of AOL: he’s been here forever and his company was the first one AOL ever bought.
He created this machine we’re all living in (both AOL and the online business in the US), and today he does his best blog post to date about what we’re going through at AOL with regard to the big “free” movement. I’ve been having this discussions with Ted since I’ve gotten here and it’s great to see him be so transparent in explaining what AOL is doing.
Go read the post.. here are the highlights and my comments in BOLD
- The new plan is about growth. It is about changing the focus of our teams and resources. It is about having a green thumb and showing the world that we have green arrows pointing up in all of the key metrics that are important to our business. It is about a simple and logical statement of fact – AOL should never lose another customer to a competitor, and we should be able to expand rapidly on a global basis as the high-speed free Internet gains even greater momentum.
- JASON SAYS: Yes, yes, yes… it is so hard to run a business that has two different focuses. In our case the focus was keeping the dialup subscribers and building free services. These collide all the time. For example, today’s free 5 GIG of storage–the boldest move AOL has done since buying Weblogs, Inc and moving Netscape to social news–would have been a service reserved for our paid members. Then Google would offer it for free and our members would be paying for something they could get for free–again (just like email and IM). This constant back and forth is really draining for the members and for the executives. Smart people can make both arguments (free vs. paid), but at the end of the day you have to pick where the ship is heading and we’re picking free.
- …. I don’t believe the change is as dramatic as everyone in the media is speculating. We have been a subscription based business – primarily in the ISP and connectivity business – that also created a media business component. The subscription business drove the engagement of many of our customers, and then we attached other AOL-owned media properties to create a big audience business.
- JASON SAYS: Of course! The dialup subscribers who need us will keep their dialup accounts, those folks who want broadband (and can get it) will move to broadband but KEEP their AOL client software, their email, and their IM. What we’ve really done is just accepted our fate–dialup is going to be a nice business, but it will never be a 30M member business. Life goes on.
- We have a large business today. If you look at the Time Warner announcements from yesterday, we earned more than $500 million in profit (OIBDA) for the quarter. Our audience-based ad sales business grew more than 40%, second only to Google in terms of growth rate. We passed MSN, and even Yahoo, in terms of overall advertising growth.
- JASON SAYS: How come no one is talking about this?!?!?! We BEAT Yahoo in terms of growth–that means we’ve gained market share. This means we are executing really well. Now that we are going to keep 1M more emails a quarter we’re gonna get even more wind in our sails I believe.
- We have a large audience today – second only to Yahoo at 113 million monthly unique visitors. We have a great engagement in terms of page views (number 4 in the industry). We have great growth rates in terms of ad revenues and RPM growth (second only to Google). And, we weren’t even totally focused as a company on this part of our industry. As I’ve said to many employees, “Just wait until we have every employee focused on the one big goal of building the world’s biggest and most engaged audience. Imagine how we will execute then. Just wait until all AOL ISP members can take all of AOL with them when they move to broadband. Just wait until everyone can keep their AOL client and use their AOL email for life – for free!”
- JASON SAYS: Focus, focus, focus… that is what is gonna change at AOL–Ted’s 100% right. Now every single person has the same mission: increase our unique users and page views. That’s it. It’s not “save paying members at all costs, but sometimes try and new users in the door–unless that kills the paying member business… oh wait, does it hurt the dialup business? I’m not sure, let’s have 17 meetings with 96 people to debate this issue while Google and Yahoo take our marketshare.”