Cross-Media Deals: AOL Time Warner ad strategy vague

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Even as AOL Time Warner's first-quarter results revealed a 31% decline in advertising and commerce revenues at its America Online unit, the strategic direction of the company's ad sales and marketing operations remains unclear.

This despite assurance in recent days from the chiefs of the world's biggest media company, CEO-Elect Richard Parsons and Co-Chief Operating Officer Robert Pittman, that retooling AOL's advertising operations is a top priority.

At the corporate level, the future of the much-vaunted Global Marketing Solutions Group, which was responsible for brokering more than $1 billion in cross-platform media deals with marketers since the January 2001 merger of America Online and Time Warner, is also cloudy.

Mr. Pittman has asked the group's president, Myer Berlow, to segue to a new role as a consultant to the AOL unit and on broader marketing issues, according to insiders. But within the sprawling media giant, there is confusion as to exactly what Mr. Berlow's role will be.

changing roles

"I do sense it's changing," said one AOL Time Warner executive, who observed that Mr. Berlow has "pulled way back," from his current post. Another executive familiar with the situation said Mr. Berlow is part of Mr. Pittman's turnaround team: "He's very involved, he's not out."

Mr. Berlow declined to comment, and the company declined repeated requests to clarify its ad-sales organization and his role. A spokeswoman for AOL Time Warner declined to comment on companywide advertising and marketing issues. Of Mr. Berlow's role, she reiterated, "He's not leaving the company." (AA, April 22)

Of Mr. Berlow's next role: "Nothing's been determined, nothing's been decided," said one company executive close to the situation.

While Mr. Pittman has reshuffled executives and named new ones to AOL in recent days, specifics on how the unit will get back on track with marketers were not disclosed-at least not last week.

The first in a series of changes at the troubled unit occurred April 9 when Barry Schuler, CEO of America Online, stepped aside, leaving Mr. Pittman with the day-to-day management of AOL. Mr. Schuler now heads a new digital technology unit within AOL. The same week, radio executive Jimmy de Castro was named president-AOL Interactive Services, reporting to AOL Chief Operating Officer Mike Kelly.

filling positions

Then on April 22, Robert Friedman, AOL's president-worldwide interactive marketing, was named to a newly created position-senior VP-corporate marketing in charge of integrated marketing and promotions across AOL Time Warner units. Mr. Pittman tapped Robert Sherman, former president of Time Warner Cable ad sales, to head the sales organization for AOL as president-interactive marketing. Charles Barrett was named senior VP-agency relations, West Coast, for AOL's Interactive Marketing Group. Mr. Barrett replaces Richard Ward.

The role of the Global Marketing Solutions Group is likely to change, said one insider, who also maintained that Mr. Friedman's new job is not the same as Mr. Berlow's current job. The GMSG may have struck more than $1 billion in cross-platform media deals, but now AOL Time Warner must find a way to make them work and integrate AOL into the mix. A streamlining of internal processes is also expected. The company is close to naming Mr. Berlow's replacement as head of GMSG, according to one AOL Time Warner executive who requested anonymity.

Media executives aren't surprised Mr. Berlow's role is changing. "Myer was incredibly successful for AOL from a dollar standpoint, but did he do anything that really represented long-term relationship-building with marketers?" said a rival executive.

Last week, the company reported a $54.2 billion first-quarter loss, the biggest in corporate history, stemming from a non-cash charge to earnings. Earnings before interest, taxes, depreciation and amortization dropped to $1.94 billion from $2.08 billion for year-ago period. Ad declines within the AOL unit were partially offset by increased intercompany advertising. Still, the unit's woes spurred management to lower AOL's 2002 forecast for ad and commerce revenues from $2.7 billion to $1.8 billion to $2.2 billion. The company also lowered company-wide EBITDA growth projections to 5% to 9%, from previous guidance of 8% to 12%.

contributing: alice z. cuneo, jon fine and jean halliday

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