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Why Once-Dispensable Access Biz Is Central to AOL's Strategy

Company Sees Subscribers as Key Source of Insights It Can Use to Understand Online Behavior, Ad Receptivity

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NEW YORK (AdAge.com) -- It was like a collective sigh of relief: In September 2007 Reuters reported that Time Warner was finally prepping a spinoff of AOL's long-bleeding access business. Never again would it be known for helping consumers dial up and connect to the internet. The deal would complete AOL's transition to a newly restructured business that saw a bright future in ad-supported content.

Jeff Levick, president-global advertising and strategy, AOL
Jeff Levick, president-global advertising and strategy, AOL
That was then. Now, on the eve of a spinoff from Time Warner, access is at the core of new management's vision for the future of AOL, and not just for its still-considerable cash flow. Why? The belief is it can help AOL's ad business by, among other things, serving as a quasi-focus group and playing a role in audience measurement. Moreover, subscribers are AOL's most loyal customers, more likely to buy or just try other services. AOL may be a diminished behemoth, but it has one thing its main competitors don't: lots of customers that actually pay the company on a monthly basis.

"We have a renewed perspective of the value of this group of people as it relates to the company's success," said Jeff Levick, president-global advertising and strategy.

AOL had about 5.8 million subscribers to some sort of service at the end of June. Mr. Levick said it isn't just about dialing up anymore; many people have broadband connections but still count themselves as AOL customers for other services, such as additional tech support or back-end connectivity while traveling.

AOL plans to explore other web-based subscription services it could market to the group. While Mr. Levick wouldn't elaborate, it's easy to see how those services could include things such as anti-piracy or cloud storage, or perhaps even paid content.

Valuable eyeballs
While many major ad-supported internet properties would kill to have as many paying users as AOL, it's the users' behavior that puts them in the company's sweet spot. Subscribers are AOL's uber-users -- more valuable than average because they use more AOL properties and products than typical web visitors and, as a whole, are a large part of the traffic that sees ads and then converts, either by clicking through or making a purchase.

The company also sees subscribers as a valuable source of research and insights -- a sort of panel it can use to understand online behavior and ad receptivity.

"There are other ways they can bring value, ways we can use the data and understand how they interact with content," Mr. Levick said. "If we can look at them in the aggregate and see how they interact with certain advertising, it could bring us closer to the last mile of online research."

How it would do that isn't exactly clear, but like other web properties, AOL has databases of users who have registered for services and can work with marketers to "database match."

"[Database matching] is interesting in terms of connecting online exposure to offline sales," said Carrie Frolich, managing director-digital at Mediaedge:cia. "If I have a client that directly sells their product, be it a pizza-delivery or phone company, they know names and addresses, and AOL knows that. With the assistance of a third party, they can match up our database and their database and come up with a matched set that you can load into ad server and measure exposures and measure the lift."

The downfall, she said, is there's no way to create a control group that won't be exposed to ads on other sites, making it difficult to isolate lift.

Fine line
AOL has to tread carefully. Pushing this too far could put the company in the middle of the privacy debate in Washington, an uncomfortable place to be. Mr. Levick was very careful to note that any use of AOL subscribers for research purposes would fall within privacy guidelines and steer clear of any personally identifiable information.

AOL has made clear that its differentiation from its biggest rivals, portals such as Yahoo and MSN, lies in the sheer volume of content it's generating. And that's where the subscription-business-as-panel approach may be most valuable.

"What's up for grabs right now is whether they can be the good storytellers that capture people's attention. If they've got a built-in focus group, more power to them," Ms. Frolich said.

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