After the deal received final approval last month, the focus immediately shifted to the slashing of 2,000 jobs at AOL Time Warner. At AOL alone, 725 people were fired out of a premerger work force of 15,000. Those cuts were on top of the 400 layoffs at the CNN Group and dozens of layoffs at the Times Mirror Magazines unit due to the shutdown of three consumer titles, Today’s Homeowner, Outdoor Explorer and Senior Golfer.
Once the bloodletting ends, the focus is likely to shift to the media behemoth’s marketing efforts. Opinion is divided on whether AOL, which has an audience of about 27 million people, and, indirectly, its corporate parent, with millions more subscribers, are a good fit for b-to-b marketers. There’s also debate about whether AOL should grow a b-to-b division organically or create a separate unit.
"They have to change people’s expectations about AOL and then get into electronic b-to-b,"d said Joel Whalen, an associate professor of marketing at DePaul University’s Kellstadtt Graduate School of Business. "They’ll have to say, 'We’re not just a family computer appliance, but now we’re a tool for business.' They can have a new image and new icons. It can de done, but it’ll be tough."
Jonathan Ward, president of Businesswriting.com, a consulting and copywriting company that works exclusively with b-to-b companies, said he is skeptical about AOL Time Warner’s b-to-b potential. "The merger’s impact on b-to-b media will be imperceptible," he said. "The market for b-to-b isn’t there, aside from b-to-b hubs."
AOL Time Warner executives were unavailable for comment.
E-marketplace leader AOL has created numerous e-marketplaces in recent years. For instance, AOL and Sun Microsystems Inc. have three-year development and marketing agreements to help companies and Internet service providers enter the e-commerce market and scale their efforts. Those agreements end next year.
Last February, AOL and Onvia.com Inc., an online small-business marketplace, entered a pact to market Onvia on several AOL sites, including Netscape Center. And AOL’s b-to-b exchange with PurchasePro.com Inc., initiated in March 2000, was expanded last week to promote the company’s e-commerce business services across several AOL Time Warner brands, including the Fortune Group, made up of Fortune, Fortune Small Business and eCompany Now magazines and CNN.
CNN, which has a large business audience, has a three-year, $50 million strategic alliance with computer-book and magazine publisher International Data Group. The alliance includes online and on-air cross-promotion and co-branding of TV and Web site content.
Gale Deikoku, a senior analyst in the San Jose office of Gartner Group Inc., said AOL Time Warner presents ample marketing opportunities for traditional b-to-b players—beyond creating Internet hubs. "Yes, AOL Time Warner is geared to consumers, but the company has extensive channels of distribution with retailers in every class of business," she said. "It’s a huge opportunity for market intelligence to leverage the reach of the umbrella parent, which has tons of content distribution" via its TV, film, cable and video divisions.
She added that it may behoove AOL Time Warner to "aggregate data about its audiences and share that data with b-to-b companies" eager to take advantage of the company’s deep reach.
Jim Sterne, president of Internet consultancy Target Marketing, said: "There’s no reason why they can’t partner with Ziff Davis and all the rest to get the full boat. Why should AOL’s Internet connection be 250 Web sites when they can have them all?"
In order to do this, AOL would have to segment its markets, Sterne said. "They have a lock on the consumer side, but if they want a piece of the b-to-b pie they would have to develop, say, AOL Business, with a separate name and separate colors," he said. "The hazard is to include too many properties" in one portal.
Tom Kemp, CEO of Penton Media Inc., said that while AOL alone will continue to cultivate clients for b-to-b exchanges, he doubts the corporate parent will target b-to-b as part of its overall strategy. "B-to-b efforts might take a back seat," he said.
"Conventional wisdom says [AOL Time Warner] is not a good space for b-to-b, but maybe it’s time to defy conventional wisdom," said Gary Hennerberg, the principal of Hennerberg Group Inc., a direct marketing company. "Anybody with a small business that has an AOL account could form a strategic alliance. It makes sense for AOL to create a separate domain, with the same functionalities, targeting b-to-b."
Last Wednesday, AOL Time Warner released its first earnings report as a combined company, showing a fourth-quarter loss of $1.09 billion. The loss, stemming from costs related to the merger, compared with a proforma loss of $201 million during the same quarter a year earlier. Quarterly revenues grew 8% to $10.2 billion. Revenues for the year rose 11% to $36.2 billion.