AOL Realigns Ad Business, Expands HP Deal

By Kenneth Li, Reuters  |  Posted 2007-12-10 Email Print this article Print
 
 
 
 
 
 
 

AOL said it has realigned its advertising business and expanded a deal with Hewlett-Packard beyond the United States, as part of a move to take its properties and services into more than 30 countries in two years.

NEW YORK— AOL said on Monday it has realigned its advertising business and expanded a deal with Hewlett-Packard Co beyond the United States, as part of a move to take its properties and services into more than 30 countries in two years.

The Internet division of Time Warner Inc. is also moving its corporate headquarters to New York City to be closer to the Madison Avenue advertising capital. AOL aims to create a one-stop shop for advertisers seeking to market their products and services on its own site as well as on other properties across the Web.

AOL said it would also now provide computer maker HP with co-branded local-language versions of its Internet portal, its toolbar and its search services for use on HP computers in two dozen countries around the world, expanding an existing deal.

"We don't think portals are big enough to meet the demands of advertisers," AOL Chief Operating Officer Ron Grant said in a phone interview on Monday. "We will be adopting the network model on a global basis."

Grant said the company had been working on the new structure since last December.

The unit of the world's largest media company stunned Wall Street by cutting its ad growth forecast at the end of the second quarter, partially as a result of marketers placing their ads on third-party networks rather than AOL.

The disappointing ad estimate fueled calls from analysts and some investors for the spin-off or sell-off of AOL.

AOL, which accounted for about 16 percent of Time Warner's profit and about 17 percent of revenue in 2006, was restructured last year to focus on ad sales rather than subscription fees for dial-up Internet services.

But four consecutive quarters of online ad sales growth of over 40 percent abruptly halted in the second quarter this year, with growth of only 16 percent.

Time Warner Chief Executive Richard Parsons has told investors the company would seek to court ad dollars by investing in its own third party ad networks.

The realigned AOL ad sales force, called Platform A, combines its collection of ad divisions: one of the top ad networks, Advertising.com; Tacoda, which targets users based on their habits; wireless ad network Third Screen Media; video ads company Lightningcast; and ADTECH, a global ad-serving company.

Together, Platform A reaches about 90 percent of U.S. online users, AOL said, according to Media Metrix figures.

"The strategy behind creating the new entity is to drive revenue and results (for advertisers)," said spokeswoman Anne Bentley. "We're hopeful we'll start to see favorable results almost immediately."

Bentley said AOL, currently headquartered in Dulles, Virginia, already has several hundred employees based in New York in its programming and advertising teams.

Many of the company's senior executives will also be based in New York, including Chief Executive Randy Falco and Chief Operating Officer Ron Grant.

AOL said that its executives would continue to spend some time in Dulles and that AOL would keep offices in Dulles; in Mountain View, California; and in other places.

Asked if Time Warner was considering selling or spinning off AOL in part or whole, Grant said: "We're focused on operating the business now."

(Additional reporting by Sinead Carew)

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