AOL Reduces Weak Properties, Focuses On Ads
New York – Unable to gain a solid stand in the personal media space, AOL plans to scrape its Bluestring, a site to share videos, music, and photos; Xdrive, a general-purpose online storage service; and AOL Pictures, where people could store and share photos, as the Time Warner unit is putting great effort in its transition from a business model based on subscription fees to one based on advertising revenue, according to a July 14 memo from Kevin Conroy, AOL’s executive vice president of products and marketing.
“The memo was published Thursday by TechCrunch.”
“These consumer storage products have not achieved adequate footing in the marketplace or the monetization levels necessary to offset the high cost of their operation,” Conroy said in the memo.
“We have been focusing on doing things differently,” Conroy said. “The things that are necessary to transform a business do not come easily. With two quarters have just passed, it is now fair to say that results across the AOL products team have been mixed,” wrote Conroy, in an e-mail to staff.
In his memo, Conroy also said that its mobile services AIM World and MyMobile will be “sunset” because they have not gained enough popularity. A source close to AOL said the leaked memo is legit and that it was intended solely for Conroy’s team.
AOL’s dilemma with recognition among end users and advertisers is widespread, judging by the anemic growth AOL achieved in advertising revenues in the first quarter: 1 percent, when compared with the same quarter last year.
Conroy’s internal email describes the logical approach being taken by AOL. At this point, Conroy wrote, “every product makes a direct impact on the bottom line.” That is to say, AOL can no longer afford to carry the burden of products that do not “effectively contribute to the financial health of [the] company.”
AOL, since couple of years has been attempting to shift away from its traditional business, based on charging people for dial-up Internet access service and for exclusive online content. It has been trying to move to a model based on online advertising, which has been experiencing strong growth in the past five years.
“The decision to close-down these products is 100 percent part of a strategy that began last year to focus on the areas where we can win and to move away from products or features that are not contributing to our growth,” AOL spokeswoman Trish Primrose said.
AOL started taking a strong look at its portfolio following a 2006 decision to fully shift the company into an advertising business and pare down its legacy Internet access services.
Company officials declined speculation Friday that the closures were meant to prime AOL for a sale. AOL, a division of Time Warner Inc. has been in constant negotiations with both Yahoo Inc. and Microsoft Corp., though the talks have been preliminary.
However, the message for closing online services does not come as a great shocker at all as this is not the first similar move done by AOL; last year alone, 50 underperforming products were dropped by the company, as the company has become much more selective about maintaining only products that directly support the online advertising strategy, the source said.
AOL is also trimming some of the blogs it hosts, according to a different memo obtained by PaidContent.org. The DIYLife blog is being shut down, according to that report, and bloggers there and at the Unofficial Apple Weblog and DownloadSquad, who are paid by the post, have been told to stop posting until July 31 to cut costs.
The memo does not states which blogs are affected, but similar memos were sent to financial and gaming blog sites. AOL hosts over 25 sites in its blog network.
According to the memo, AOL also intends to combine its Video Portal with its AOL Programming Video Experiences by the beginning of the fourth quarter, as well as try to boost the online ad revenue generated by the AOL browser toolbar, desktop software, Webmail service and Truveo video search engine.