At 25 years old, AOL switches tracks: Creating content, not just connecting users

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http://www.washingtonpost.com/wp-dyn...rss_technology




A few weeks ago, as Steve Case was flying above Sterling, en route to Dulles International Airport, he looked down and saw the sprawling campus that is home to the company he co-founded 25 years ago this month -- the pioneering service that took millions of people online for the first time.

"Always weird to fly over AOL's headquarters," Case tweeted not long after landing. "Time flies."

He attached to his tweet a photo of the impressive campus -- the Internet has blossomed far beyond "You've got mail!" -- but AOL these days fills only a little more than half of its original 1.2 million-square-foot Virginia home. Several of the buildings were recently leased to Raytheon, a defense contractor. Key AOL executives have moved to New York.

On Monday, as the company competes for a place in the Internet's future, AOL will look back, naming some of its remaining properties in Sterling after three key executives who built the firm: Case, Ted Leonsis and James V. Kimsey. The three titans left AOL either before or after its disastrous merger, valued at more than $160 billion, with Time Warner.

"The AOL brand has one of the biggest legacies in terms of what has changed the world in the last 50 years," said Tim Armstrong, a former Google executive who was named AOL's chief executive in March 2009.

But AOL, which is once again independent, having spun off from Time Warner last year, is trying to look ahead, searching for a footing in a world of blogs, social networking, targeted ads and tweets from airplanes. Some industry observers openly wonder whether AOL -- for so long associated with the oh-so-'90s screeching sound of dial-up Internet connections -- can survive in a broadband world dominated by Google, Facebook, Microsoft and Yahoo.

Inside AOL's campus, where remnants of the go-go dot-com days still dot the hallways -- foosball table here, massage chair there -- employees say an unusual culture is taking hold: A big company with $262 million in the bank and such perks as on-site day care is trying to adopt the stay-late work ethic of a start-up, albeit one where the average employee age is 35, not 22. These days, the slogan on signs around campus urges workers to "Beat the Internet" -- that is, to surpass AOL's dominance of the Web in the 1990s.

AOL is quietly receding from its old subscriber model -- 35 million Americans got Internet service from AOL in 2002, but fewer than 5 million do today -- yet the company is reaching far more people through its content, which Nielsen ratings say attracts the seventh-largest audience of any Web brand.

"A lot of us are here now for the turnaround," said Amy Craig, a product manager who works on AOL's social networking applications, such as AOL Instant Messenger. Craig said she recently turned down job offers from other big tech firms. And she no longer cries at home after big meetings. "I'm happy again," she said.

Craig, one of about 5,000 employees remaining after buyouts and layoffs slashed AOL's workforce by a third over the past six months, is getting behind an audacious goal: AOL wants to be the biggest newspaper (and magazine and TV network and movie theater) on the Web, creating millions of pages of news, reviews, statistics, how-to guides -- any content around which it can sell ads.

It has created or bought some of the most popular sites on the Web: Engadget.com, for gadget geeks; PoliticsDaily.com, for politicos; FanHouse.com, for sports nuts; DailyFinance.com, for business news; and even MMAFighting.com, for fans of the world of professional fistfights.

The AOL brand barely appears on any of these sites, an approach AOL executives confidently compare to Disney's unbranded ownership of ABC, ESPN and Miramax. The idea is to let each of the smaller, targeted brands create its own relationship with consumers.

"This is really our goal: We want to create high-quality, credible, trustworthy information, and do it with technological savvy," said Marty Moe, a lawyer and former adviser to Treasury secretary Lawrence H. Summers during the Clinton administration who now runs AOL's news and information operations. "What really matters is the strength of the content."

The business of online advertising is a tough one, as newspaper owners have learned in the past decade. Margins are thinner online than in print, where scarcity of ad space allowed for much higher rates. The Internet offers infinite space and endless content, driving down ad rates.

AOL thinks it has a solution. Rather than just creating news sites that cover the story of the day, it is using Internet usage data to create content on subjects people are searching for. If news about the latest "American Idol" castoff is pulling in lots of users, AOL's sites will create more content about it. The more pages AOL creates, the more pages users see, and the more ads it can sell. "Believe it or not, content really is a toddler on the Internet right now," Armstrong said.

Much of the technological work still happens in Sterling, and to lead it, AOL recently lured Bill Gates's former tech adviser, Alexander Gounares, away from Microsoft to be chief technology officer. "Content matters," he said. "Can we optimize what kind of content people see when they want to see it?"

Such talk causes palpitations for news traditionalists. "This is a huge change about how we think about journalistic content creation," said Ken Doctor, a media analyst and author of the recent book "Newsonomics."

"Whoever the winners are five years down the road, whether it's AOL or Yahoo or whoever, they are going to be very powerful."

How many pages could AOL create? There really is no limit, executives say. The firm has a site, Patch.com, that is creating hyperlocal content aimed at communities block by block. The other day, the Patch.com site for Arlington, Mass., featured news about a police car that was hit during an arrest and tidbits about the Hardy School annual car wash and bake sale. (Patch sites covering some affluent Washington area communities are scheduled to debut this year.)

AOL's Fanhouse site is creating home pages for every professional athlete in every sport in every league on Earth. Really. Page proofs for the largely automated effort hang on a whiteboard near Moe's office. "We're always going to have editors deciding what's important, but we're gonna leverage technology to give people what they want," Moe said. "The combination of editing and technological savvy will carry the day."

But to prevail, analysts said, AOL must create a lot of that content cheaply. To that end, it has started Seed.com, run by former New York Times technology reporter Saul Hansell, and pays up to $50 per news article to anyone who can reliably string sentences together. AOL fuses that content with its professional, higher-cost content.

For example, a writer could earn $20 by submitting at least 15 quotes of dialogue from the movie "MacGruber," which might be used on moviefone.com. Or one could collect $50 by contributing "Real Stories From Men Who Have Been Cheated On," the best of which might appear on AOL's men's site, Asylum.com. "What happened, what did it feel like, how did you react and most importantly, what did you learn?" the assignment says. "You must include a photograph of yourself or your submission will not be considered."

Says Doctor, the media analyst, "We are now officially in the era of cheap content creation."

But AOL executives stress that even if they get it for next to nothing from readers, content has to be good. Their reason: Google. The search giant's vaunted algorithm gives heavy weight to content that's good enough to be popular and widely recommended -- the more times a page is linked to, the higher it rises in search rankings.

AOL's finance and gadget sites have recently won journalism awards, but so far, the new AOL's financial results have disappointed Wall Street. Poor quarterly results recently sent AOL's stock plunging, but the stock jumped a couple of days later after Armstrong bought more than $11 million worth of shares -- a personal vote of confidence that low-level AOL employees quietly cheered.

And increasingly, according to marketing executives, advertisers are putting AOL back on their radars. There's a long way to go: In the most recent quarter, AOL's sites attracted 2.9 percent of the display ad market, behind Facebook, Yahoo, Microsoft and Fox, according to Comscore. But "AOL is definitely on the map in the digital media scene," said Bant Breen, president of the New York ad firm Initiative Worldwide. "The world demands high levels of content curating, and AOL has the ability to do that."