America Online switching to CPM-based ad rates

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New sponsor plan answers past charges of inflexibilty

America Online, lashed by the ad community last year for an expensive and inflexible ad plan, is about to pitch marketers on a new cost per thousand-based sponsorship model.

The online service will begin a road show next month to tout a plan AOL executives said responds to demands for more traditional measurements and a wider choice of options for sponsors interested in reaching some or all of its 5 million subscribers.

TIME TO CHANGE

"There have been issues with the advertising community in the past that we've been unresponsive and inflexible," said Mark Minkin, AOL VP-interactive marketing sales. "We want to change that completely."

AOL's newfound flexibility is a reverse from last year, when it introduced a plan under which sponsors would pay premium prices of $200,000-plus to build unlimited marketing content areas. AOL insisted it wouldn't negotiate rates and wanted only a handful of blue-chip marketers.

"That type of test wasn't very successful," Mr. Minkin said. "Agencies weren't ready, and many clients hadn't set aside budgets."

Among those that did create AOL content areas: American Express Travel Related Services, General Motors Corp.'s Oldsmobile and McDonald's Corp.

Mr. Minkin said that in discussions with agencies the CPM model "is what we're clearly hearing about. It's the measure advertiser...are comfortable with."

AOL Services Co. President Ted Leonsis wants to add more "venue marketing" programs modeled after Reebok International's sponsorship of AOL's recent Online Music Awards.

AOL will offer links to the Web and internal links. AOL also plans to try to convince content providers to align their pricing with AOL's. Content providers' most expensive rates are equivalent to a CPM of $20 to $80.

AOL will charge CPMs of $50 to $80 for ads on the top six screens of each main content area--like news or entertainment.

AOL wants $100 million in ad revenue for fiscal 1996. In the year ended June 30, 1995, it took in $35.8 million in advertising, marketing and transaction revenues.

TRACKING ABILITIES

In a presentation to agency executives last week, VP-National Accounts Myer Berlow touted AOL's tracking capabilities. Attendees said Mr. Berlow told them AOL can track in detail each user's activity on the service.

Agencies plainly covet such accurate tracking. But they are wary of the company's past inflexibility.

"I'd be more likely to put my first ad dollar on AOL now because it's got demographic information and a population that major Web sites can't provide," said Matt Thornhill, president of Martin Interactive, Richmond, Va.

Debra Aho Williamson contributed to this story.

Copyright February 1996 Crain Communications Inc.

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