AOL Cracks Web Publishing -- Sans Time Warner

Portal Points Way to Future, and It's Vertical Sites Run by Small Staffs

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NEW YORK (AdAge.com) -- In the heady days of early 2000, the megamerger of AOL and Time Warner heralded the web-based future of publishing. It would create a digital platform for Time Inc., the biggest, most-prestigious magazine group in the world.

Needless to say, that didn't pan out, and here's where it gets ironic. Just as Time Warner is unwinding that mistake, AOL is figuring out the future of magazine publishing on the web. And it's doing so without Time Warner's content assets.

The model goes something like this: Find a vertical with an audience attractive to advertisers, brand it (Daily Finance, Asylum, Lemondrop, Politics Daily), hire five to seven people to run it and plug in AOL's traffic fire hose. Repeat.

They're the antithesis of the kind of quality standards Time Inc. and Condé Nast tout, relying largely on aggregation, blogging and traffic-goosing tricks such as provocative slide shows. But unlike the print publications trying to port their cost structure to the web, these publications can be cash-positive from the start. In fact, one could argue these sites cropping up represent today's version of the magazine launch -- after the old, splashy kind died with Portfolio.

The notion of thin-staffed online publications is sweeping the industry. MySpace launched celebrity site DailyFill earlier this year. Last year MSN launched Wonderwall, created by the same team that earlier launched the Yahoo version, OMG. Break Media, owner and operator of guy-centric video site Break.com, hired a few Maxim refugees for its own online lifestyle title, MadeMan. Sugar Inc. has launched a dozen titles off its PopSugar brand. Then there's Nick Denton, godfather of the model, whose Gawker Media has been making inroads in brand advertising after slogging away in this space since 2002. Even Time Inc. and Condé want to launch similar products.

'Massive change'
AOL is making its version of web content one of four cornerstones of its post-spinoff strategy under its new management -- incidentally execs bred at Google, a company famously, even religiously, against creating any content.

"This is core to our business. We will continue to grow these sites and launch new sites," said AOL President-Global Sales Jeff Levick, who previously worked with AOL CEO Tim Armstrong at Google. "It's a massive change for our business model."

AOL started cobbling together sites and blogs after the remake of Spinner as a music site and the 2005 acquisition of Weblogs Inc., whose marquee properties included Engadget and Joystiq. From that base, AOL has launched more than 40 sites, including 13 since the beginning of 2009.

Why would AOL want to become a content company? For starters, that's where the traffic growth is coming from. AOL's traffic was down 4% in May as it shed more dial-up subscribers, and traffic to its home page is down 32%. Meanwhile, traffic to the 70 sites in AOL's MediaGlow unit grew 5% to 76 million unique visitors in May, according to ComScore.

Then you've got an economic environment tailor-made to building this business. Traditional magazines are in disarray, talent is cheap, and audiences are splintering and accepting of new brands. AOL has more than 300 people producing these sites in New York and has contracts with about the same number of freelancers. In the past six months, AOL has hired more than 50 journalists from places such as the Associated Press, Washington Post and USA Today.

Traffic advantage
"We look where there is white space where no one is doing anything, or where there aren't any properties at scale," said MediaGlow President Bill Wilson.

One of AOL's newest sites, Politics Daily, took just a month to knock off Politico in unique visitors, an example of the kind of advantage AOL's instant traffic provides. AOL also has something to do with the ads from Walmart and Sprint on Politics Daily; most political sites are confined to issue-based, endemic advertising.

"We are able to tell advertisers, 'These are the kinds of consumers engaging here, the same ones you wanted to engage with two minutes ago when they were on TMZ or Walletpop, or when they were interested in Glidden paint,'" Mr. Levick said.

Carrie Frolich, managing director for digital at Mediaedge:cia, said she thinks the more the sites de-emphasize their connection to AOL, the better. "They have shown they can build up some solid content and audiences for their organic brands," she said. "In terms of their competitive set, I definitely think they can play with the Time Inc.'s and Condé Nasts of the world."

Mr. Wilson doesn't like to draw comparisons to AOL's erstwhile corporate cousins, which is understandable, but it's hard to ignore the difference as the two get set to go their separate ways. "We're not hindered by a traditional media cost model," he said.

Still, they are microbusinesses -- and there's question whether audiences and ad rates will ever be big enough to displace their magazine counterparts in either revenue or public discourse. AOL is counting on it.

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