AOL's 'gut-wrenching' overhaul

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America Online, plagued by hemorrhaging subscriptions, consumer confusion over its direction and the departure of its top marketing executive, is scrutinizing its strategy in a move expected to put the focus back on dial-up services, hard-sell direct-response ads and price.

"There are a lot of gut-wrenching changes going on there now," said an agency executive working on the business.

The whole approach to marketing is under review, according to a senior AOL executive who also said the agency roster will be pared back. The insider said AOL will not spend anywhere near the $300 million previously cited in reports; instead its 2004 outlay will be in line with last year's spending, estimated at only half that.

The marketer will go ahead with plans to advertise on the Academy Awards, but left in limbo is a product placement deal with Fox's "The O.C.," the executive said. An AOL spokesman declined to confirm the company's spending or discuss future marketing activity.

Under Len Short, who recently left as exec VP-brand marketing, AOL pursued a strategy of using stars like Snoop Dogg in ads, and linking the brand to concerts and sports events, including the Super Bowl.


Mr. Short's tumultuous reign at AOL began with him dumping Interpublic Group of Cos.' Gotham, which had developed much of the direct-response style of advertising the company is now thinking of reviving. Mr. Short reviewed not only creative agencies, but interactive and media during his tenure. Both the creative and interactive reviews ended with two agencies sharing the business.

Consumers have also been left confused by AOL's shifting priorities. During the past 12 months, the company has sent numerous marketing messages on its broadband and narrowband services and about services such as spam, protecting kids and speed.

An analysis by Morningstar Research shows AOL lost 2.2 million of its 26 million customers last year. According to Merrill Lynch, AOL lost 827,000 narrowband subscribers in the last quarter of 2003 but grew broadband customers by 400,000.

AOL Vice Chairman and former Time Warner finance chief Joe Ripp is now taking charge of marketing, giving up his financial duties to Chairman-CEO Jonathan Miller. According to one executive, this change was one reason Mr. Short became dissatisfied. His responsibilities are being split between two existing staff members: Richard Taylor, senior VP-brand marketing, and Mark Greatrex, exec VP-marketing and brand development. Mr. Taylor is set to take on agency relationships, while Mr. Greatrex is charged with brand strategy and research.

Mr. Short, who is unable to speak to the press because of contractual obligations, didn't respond to requests for an interview. However, one senior executive who worked with him on AOL business said, "He did exactly what they asked him to do and more."

AOL's agencies currently include BBDO Worldwide, New York, which still has numerous unaired AOL commercials on the shelf, and interactive sibling Atmosphere BBDO, part of Omnicom Group; independents Wieden & Kennedy, Portland, Ore., and Digitas and Interpublic's Initiative Media which retained the company's media account last week.

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