Q & A - Logan: AOL to see double-digit gains

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Don Logan has just finished his first year as chairman of Time Warner's Media and Communications Group, overseeing Time Inc. and the troubled America Online division. He sees daylight at the end of a long, recessionary tunnel, promising double-digit growth at AOL next year. And he says Time Warner would not consider selling AOL-at least so long as it remains a "sustainable business." Advertising Age's Jon Fine sat down with Mr. Logan in his New York office Dec. 10.

AA: Philosophically, how does Time Warner in 2003 differ from Time Warner in 1993 and AOL Time Warner in 2001?

Logan: Our company still believes in decentralized operations, because all of our businesses are very different and compete in different industries. I don't think that's changed a lot. We are committed to making sure that when the opportunities are there, we run with them, but if they're not, we don't try to force them

AA: Sounds like a change from post-merger talk about synergy.

Logan: In the beginning, a lot of people felt it as important that we work together and demonstrate that we were working together, whether the things we were working on were significant or not. Almost like managing for [Wall] Street expectations. So if there was an idea two divisions are working together on, it's a newsworthy story. Now if it doesn't make sense, we don't do it.

AA: On that point, why put Time Inc. content behind the curtain at AOL?

Logan: It helps Time Inc.'s consumers understand that not everything is going to be free on the Web. We were concerned about losing traffic, and concerned about not selling as many subscriptions over the Internet. But both of those things turned out to be not true. And it's going to generate additional incremental advertising as we put events and content together that we can monetize.

AA: Is there an incremental ad upside yet?

Logan: Not a lot. We sold enough to know it works. Probably by next year we can quantify it a little more. But it's going to be meaningful. It's not a tiny thing.

AA: Why is AOL today not like Life in the `60s-a dominant brand with a huge audience facing a vastly changing landscape that will make it obsolete?

Logan: Life was based on a model where network TV was not a player. The magazine existed to generate advertising, and circulation was given away. Life, Look, and the Saturday Evening Post all had 7 million to 8 million subscribers, and they soaked up all the mass advertising. There was no network TV of any scale until the `60s. When that came, those magazines' costs were so high they couldn't cut fast enough to offset the ad revenue decline. They didn't know you could sell magazines and get subscribers to pay for it. With AOL, people aren't going to stop emailing. They aren't going to stop chatting. They aren't going to stop buying online. There is a need to connect customers in a way AOL has been very good at. If they stay on the top of the product side of the business, they can migrate to new business formulas.

AA: You said advertising turned around at AOL in the third quarter, but didn't ad revenue fall in the third quarter?

Logan: What we are selling is increasing-we still have backlog burning off. The absolute numbers of revenue reported year over year will start showing gains, probably, in the fourth quarter. We still don't know yet what churn rates are going to be long-term at our broadband product. But we said we wanted to restore growth, and bottom-line growth, and we are publicly announcing AOL will deliver double-digit growth next year. I would give us maybe a B.

AA: What about Time Inc.?

Logan: Time Inc. had a tough year. It started out strong on the ad front in the first quarter. Then ads slowed down the last nine months of the year. I won't say they are struggling. The core businesses are still doing pretty well. The women's titles tended to do better than some of the men's this year.

AA: Are there more magazine launches coming beyond Cottage Living?

Logan: For sure we got a couple next year. It may migrate to three or four before the year's out. There are a couple of good ones on the drawing board. You just have to find money to do that. Just like at AOL you had to find money to develop the product even though we were in cost-cutting mode.

AA: Do you see magazines migrating from [U.K. magazine group] IPC to Time Inc., or vice versa?

Logan: We tried that. We had study groups look at all IPC and Time Inc. titles. There's been a couple of things experimented with. But probably most of our magazines just don't translate.

AA: How long do you have to turn around AOL?

Logan: We need to increase our profits next year over this year to demonstrate this is a business that has a future. And we need to do that the year after that. We need to turn this business now.

AA: Does it ever make sense to sell AOL?

Logan: It would only make sense if the company and the people at AOL believe they don't have a sustainable business model that allows us to grow in the future. This is a company committed to staying in the businesses that have sustainable growth models year after year, and are the leaders in the industries in which they compete. If it gets to the point where you can't do that, obviously you have concerns and have to look at other alternatives. That's a long time off.

AA: There have been culture clashes between Time Inc. and some of the youth niche titles at Time4 Media. Is this a problem?

Logan: Sure. And it's a wonderful problem. If you can't learn to deal with that, you restrict yourself in terms of what you are going to be able to do in the future. You've got to allow multiple cultures to exist or you can't operate. It's fine to have edge. You've got to have a few crazies. You've got to have people who are stirring things up, that are out on the edge all the time. If you don't, you'll die in the middle.

Read more from Don Logan online at AdAge.com

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