By Leslie Walker Thursday, October 17, 2002; Page E01
That loud puffing sound coming out of Dulles these days is America Online trying to reinflate itself. In case you hadn't noticed, the highflying media king has been losing altitude: Subscriber growth has stalled, ad revenue has tanked, and federal accountants are crawling all over its books.
Yet AOL is attempting what Internet historians may one day deem a pivotal about-face, a turning point akin to when it embraced flat-rate pricing or stopped creating original content back in the 1990s. One clue to the scope of this reversal came Tuesday, when AOL, the company that brought pop-up ads into the Internet mainstream, announced it would stop selling those annoying ads, which spawn their own browser windows.
For a deeper look at the transformation, go behind the welcome screen of the gussied-up 8.0 software that AOL released this week. The new welcome page looks a lot like the old one, only what's happening in the background is more complex. Headlines and images change frequently based on two variables: the time of day, and which of six possible profiles a person selects. The profiles allow AOL to offer programming, and they'll eventually offer advertising geared to personal preferences: news and sports, say, or games and movies. Since the changes are in their infancy, all six welcome screens still look similar.
But the big idea is to make AOL's menus increasingly variable so they will become more relevant over time to individual members and advertisers. The goal is to create an advertising environment compatible with how advertisers place messages in television and radio, because big companies typically synchronize campaigns across media. Another goal is to highlight AOL's original material -- interactive polls, "First Listen" music debuts, live chats with celebrities -- to convince people that AOL is worth the extra money as competitors race to sign up people for Internet access at higher speeds.
The new programming model represents "a start for the whole Internet industry," said Michael Barrett, AOL's senior vice president of national advertising. "The interesting aspect is we are now trying to talk to consumers in more of a network fashion and program their experience so it's relevant to them during specific times of the day."
Layered on top of the new welcome-screen profiles is an elaborate programming grid aimed at building audiences around activities at designated times of the day, week and month, allowing advertisers to target their messages in the familiar rhythms of television.
"We just hired a network programming team, and we are going to have more and more programs focused around these segments," said David Gang, AOL's executive vice president of product marketing. The time-of-day guides will eventually appear on AOL's channels, such as entertainment and shopping.
If this sounds like broadcast lingo, it's because AOL's facelift is being engineered by a new leadership team that came out of television and radio. They tend to see the Internet in terms of "shows," with measurable audiences and specific airtimes.
But the Internet isn't TV, of course. Its strength is in offering content on demand, making it inherently asynchronous. So some Internet veterans find AOL's latest approach puzzling and wonder whether the changes will prove to be cosmetic.
Others in the ad industry seem eager to give it a try, contending that running advertisements in certain blocks of time -- a concept known as "day parts" to TV ad buyers -- could help draw mainstream advertisers who remain leery of the Internet. AOL wants to create its own equivalent of a "Friends" audience, a group of young, hip, urban Internet users who identify themselves with the menus they choose on AOL's welcome screen.
"Day parting is probably the number one trend in online media for 2003," said Jeff Lanctot, chief media strategist for Avenue A, an Internet-focused ad agency. "We think it will be incredibly effective for reaching daytime users at work -- what we are calling the 'Internet prime time' audience."
Lanctot said one of his firm's clients, AT&T Wireless, ran an online ad campaign this year targeted at the affluent daytime Internet audience and considered it a success. Next year, Avenue A predicts that 15 percent of all Internet ads will be targeted by time of day, and within three years, 50 percent.
But another Internet media buyer said her clients aren't ready to embrace the TV ad model online. Sharon Katz, vice president of media at Modem Media, considers the appeal of Internet marketing to be its ability to target messages based on what people are doing, not when they do it. "It's all about using the Web, not reading or watching it," Katz said. "We still don't know a lot about what people do online at what time."
Katz said she wouldn't advise Kraft Foods, a client, to show holiday recipes to AOL users mainly during the pre-dinner hour, because they might miss super-organized moms who do meal planning online during their lunch break.
Barrett countered that it's not an either-or choice for advertisers. Kraft could run heavy promotions at 5 p.m., he speculated, if AOL knew that many mothers interested in food viewed the welcome screen at that time. Kraft could also run a more traditional Internet ad campaign in AOL's food channel around the clock. "We are trying to find the best of both worlds and not dumb down the Internet so it just looks like CBS," he said.
Along the same lines, AOL's editorial programmers say the time-of-day model isn't about making the company's music, chats or news available only at certain times. "Just about everything we create on AOL is still accessible when you don't want it on demand," said James Bankoff, senior vice president in charge of programming. "This is about how we promote things to make our members aware of our content."
In essence, AOL is trying to reinvent the Internet equivalent of a TV Guide by redesigning its menu pages to be more compatible with broadcasting. The hope is that clever programming may lead people into more predictable online habits and thereby create mass audiences.
Toward those goals, AOL staffers have been giving catchy names to interactive features, such as "First Reads" for AOL book previews, which last week included an exclusive first chapter from Lemony Snicket's latest children's book. Another example is "Celebrity Lookalikes," in which AOL members who think they look like famous people submit photos online so other people can rate their resemblance.
While AOL hasn't signaled how far it will wade back into the expense of creating original material, the renewed emphasis on its own stuff -- whether a live event or a jazzed-up instant messenger -- underscores the company's growing realization that it can't thrive in the era of high-speed Internet access without content and services that set it apart. Because if people can get online using plain-vanilla high-speed connections directly from telephone and cable companies, who needs AOL?
Although the company doesn't have all the answers, it's refreshing to see the upstart that popularized the Internet asking the right questions once again.
