The turmoil at America Online's ad-sales operation has been building for some time, but peaked April 9 when Chairman-CEO Barry Schuler stepped aside and Mr. Pittman took over day-to-day responsibility for AOL.
For more than two weeks, speculation among ad-industry and marketing executives has centered on the future role of Mr. Berlow, who heads the internal body that assesses the welter of cross-platform media deals that span the company's TV, publishing, film, Internet and music units. Mr. Berlow has been tapped for what is believed to be a special assignment within AOL to cultivate closer ties with blue-chip marketers, according to those close to the company.
Executives inside AOL Time Warner are already vying for Mr. Berlow's post, according to one person familiar with the situation.
Of the new role for Mr. Berlow, an AOL Time Warner spokeswoman said, "He's not leaving the company," and declined to comment on whether other executives were being considered for his position. A call to Mr. Berlow's office was not returned. The spokeswoman said Mr. Pittman was unavailable to discuss AOL-related advertising issues or Mr. Berlow's role.
Some advertising, media and marketing executives said they wouldn't be surprised if Mr. Berlow returns to AOL, considering he served as president-interactive marketing for America Online and president-worldwide interactive marketing prior to his current role. He has worked closely with agencies and marketers in those roles, but to mixed reviews, with some agency executives privately describing him as heavy-handed.
AOL sales executives, who asked not to be named, said they are trying to listen more to clients and agencies, a welcome development for agencies.
"We're looking for more flexibility [from AOL] in terms of newer and better ad formats to deliver better value for our clients," said Jeff Marshall, VP-director for operations, Bcom3 Group's Starcom IP digital media unit. "Yahoo!'s been markedly more flexible and has aligned with agencies a lot better," Mr. Marshall said.
"AOL is trying to make sure that the right talent is in place to sell the products," said Chris Dixon, media analyst, UBS Warburg. With regard to ad-sales efforts both cross-company and for AOL, he said AOL must come up with customized marketing programs and present them to agencies and their clients. "They need to come up with a Chinese menu, there are many advertisers out there that are looking for a marketing solution that combines the Internet with their other marketing plans," Mr. Dixon said.
AOL Time Warner's America Online unit is bound to be in the hot seat April 24 as the media giant delivers its first-quarter 2002 earnings report. While AOL Time Warner's cable, magazine and radio units are expected to hold their own, the America Online division remains a question mark. "AOL will be hard-pressed to come up with a forecast for when its own Internet advertising will turn around," said Jordan Rohan, media analyst, Wit SoundView Technology.
The company's earnings report will also take into account a whopping $54 billion write-down. AOL Time Warner announced Jan. 7 it would take a non-cash charge to earnings in the first quarter to reflect the decline in its stock since the January, 2001 merger.
While the charge is not expected to change the company's standing on Wall Street, several analysts lowered their estimates for the year, based on lower expectations of ad revenues at the AOL unit.
"If I were Bob Pittman, I would acknowledge that the organization is no longer in hyper-growth mode, dramatically reduce costs and focus very carefully on units that don't generate revenue," Mr. Rohan said, adding he wouldn't rule out layoffs.
contributing: mercedes m. cardona and wayne friedman