Mega-flop: AOL reorgs ad tactics

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With the abrupt departure of Chief Operating Officer Bob Pittman, AOL Time Warner loses the personification of the massive cross-platform ad deals it promised would sprout in the wake of its merger.

Mr. Pittman tried to force such deals through a top-down approach. His successors won't bury the oft-derided mega-media ad package. But they are likely to take a decentralized path, leaving it to divisions to cooperate on more modest programs.

Which may work for some marketers. Mr. Pittman "was either blinded by his own light or just a good bullshitter," said one top food-industry executive who'd attempted to work with the company on a number of occasions, and who called typical arrangements "the seller's [fantasy], and not necessarily the buyer's." AOL Time Warner declined to make Mr. Pittman available for interviews for this story.

On July 18, the world's largest media company appointed Time Inc. Chairman-CEO Don Logan as chairman of the Media & Communications Group, which includes America Online, Time Inc., Time Warner Cable and a book and interactive video unit. Jeff Bewkes, chairman-CEO of HBO, was elevated to chairman of its Entertainment & Networks Group, which includes its networks, movie studios and music units.

In a memo sent to staffers announcing the changes, AOL Time Warner CEO Richard Parsons acknowledged the road after the merger had been a bumpy one. "Although achieving ... unity of vision and execution has proven harder than we first thought, the appointments of Don and Jeff mark a true turning point," he said. Mr. Parsons was not available to comment.

Many within the company expect changes to how things currently work, even if specifics are elusive at this point.

"I'm sure we're going to do some tinkering with it," said Mr. Logan about the structure AOL Time Warner uses for cross-media deals, which are assembled by its Global Marketing Solutions group. But Mr. Logan stressed he didn't know what that might mean: "We'll review what's worked, what hasn't, and what needs to be addressed."

Jamie Kellner, chairman-CEO of Turner Broadcasting System, was assigned four weeks ago by Mr. Parsons to look into the structure of the Global Marketing Solutions group.

"There is no consideration of terminating it," he said, "We will probably refine the near-term goals-my guess is we'll have a more creative, rather than sales, direction with it." He spoke of "potentially including" creative content in such deals.

Bob Sherman, president-interactive marketing for the AOL unit, thinks the Global Marketing Solutions "will morph" into something focused on a more targeted list of marketers, with individual divisions playing a greater role for implementing specific programs.

Mr. Kellner expects to present his findings to top executives and arrive at an overall strategy by the end of the summer.

Great expectations

Mr. Logan acknowledged the expectations of revenue generated from such deals in the run-up to the merger "was much greater" than what had been attained, although he said the dot-com and technology ad decline was partly to blame.

In its first year of operation, the company claims $1 billion worth of such deals. But industry experts cite the likelihood of barter of goods and services, including the trading of promotional time, and say the real monetary value could be just a fraction of that total.

An AOL Time Warner spokeswoman would only say company units netted "significant incremental value" from the deals.

The company's done cross-platform deals with Samsung Electronics, H&R Block, Continental Airlines and Toyota Motor Sales USA, among many others. They've had some triumphs. A Wendy's International spokesman said, "The bottom line is we struck a good deal for Wendy's and AOL Time Warner-we are satisfied with the elements and components."

But others are more wary. "They need to, like a lot of companies with many siblings and components, figure out how to work together for the best interest of the customer," said Chris Clouser, exec VP-global chief marketing officer for Diageo's Burger King Corp.

And an executive with Starcom MediaVest, which counts among its clients Nintendo Corp. of America and Kellogg USA as well as several other package-goods concerns, said the agency was in the process of reassessing existing cross-platform deals made on behalf of its clients-which, in some cases, the executive said, were not implemented as agreed upon.

"We tried to bite off as much as we could," said one AOL Time Warner executive. "My hope is ... we won't be chasing everyone under the sun" for such deals, and added, "the structure is fine. The leadership, and the goal-setting and aggression was probably too much."

contributing: tobi elkin, wayne friedman, david goetzl, stephanie thompson and kate macarthur

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