AOL's Business Model: "High-Quality Content to Scale"

Last Updated Aug 6, 2009 4:19 PM EDT

Until around three years ago, you would never have mentioned the phrase "high-quality content" and AOL in the same sentence, because there simply was no connection between the two.

As noted here last week, those days are officially gone, apparently for good.

"We intend for AOL to be the largest publisher of high-quality content in the world," Marty Moe, SVP of AOL Media told me during a phone conversation today. "Furthermore, we are a low-cost producer of high-quality content at scale."

Moe outlined the "structural advantages" AOL enjoys over the newspapers, magazines, and television networks that have been letting so many talented journalists go over the past 18 months -- journalists who are increasingly showing up on AOL's payroll.

"Principally, we have none of the legacy costs associated with producing print publications, for example. We don't own printing presses, or fleets of delivery trucks. We don't have the elaborate editorial structures geared to producing products over a printing press."

Seizing on this advantage, AOL has been scooping up talented journalists right and left, with some 1,500 on board already â€" a number it expects to double or even triple over the coming year. Some have been hired as full-time employees; the greater portion work as freelancers.

"Over time, talent is a fixed cost," notes Moe. "You can syndicate it, distribute it as you scale. Furthermore, we are already the largest branded content company in the U.S., with an audience of 75 million domestic uniques. At our size, we can leverage the cost of our publishing and content management systems along with the talent and make the whole thing do-able on an advertising model."

While it is easy to see how the deep vertical strategy produces high CPM advertising, what may be less apparent at first glance is the cross-promotional value AOL is wringing from its ever-expanding group of verticals, which currently number around 80, only around a quarter of which have "AOL" as part of their brand names. (You can access the entire list at Media.Glow.com.)

"Scale is important to marketers," notes Moe. "So we offer ad opportunities across the verticals based on demographics. Again, the sheer size of our scale gives us a disproportionate advantage."

Moe explained how AOL's turnaround started three years ago via the acquisition of Weblogs, Inc., and its set of branded verticals, including Engadget, Autoblog, and Joystiq.
"That taught us the power and importance of branded content of consistent high-quality on the web. It also taught us about the importance of the fragmenting of the consumer model on the web. Media consumption was fragmenting, and it continues to do so today. The mass market model for media is breaking down, as people find their own way to the content they want."

Then, just as AOL management was absorbing these insights, print publications started sustaining deep losses in their revenues from ads and subscriptions. The losses were of an order of magnitude that indicated this was not an anomaly but a tectonic structural shift in the business, so, inevitably, the waves of layoffs began.

"Suddenly, a whole universe of talented writers were open to work with us," says Moe. "This accelerated what we already had underway; it poured gas on how fast we could hire the best talent in every content category."

Moe agreed with my characterization of his company's content strategy as "the opposite of a portal model."

Which brought us back to AOL.com, which these days really is a news portal, although to my eyes it could use a facelift and some upgrades to its content display, navigation, and user-engagement functionalities.

The first news headline I clicked on, "Strange Activity in Distant Galaxy Baffles Scientists," led instead to a story about a guy who refused to lower a tattered American flag. (When I checked back just now, this glitch had been fixed.)
Before letting Marty Moe go back to enjoying his vacation time at the beach, where he confirmed it was "cloudy," I just had to ask him what he thought about Rupert Murdoch's decision to force users to pay for all of the content in his publications going forward. "We encourage as many of our competitors to put their content behind a paywall as possible," said Moe, laughing, as we rang off.

[To be continued. AOL's SVP for Media, Marty Moe, offered to update this conversation with Bnet Media from time to time as AOL's strategy continues to develop.]
Earlier Related Post:
July 30 Is AOL on a Mission to Save Journalism? "When a friend forwarded that article from TechCrunch claiming AOL has 1,500 writer/bloggers on staff, and is planning on doubling or tripling that number over the coming year, I started thinking..."
  • David Weir

    David Weir is a veteran journalist who has worked at Rolling Stone, California, Mother Jones, Business 2.0, SunDance, the Stanford Social Innovation Review, MyWire, 7x7, and the Center for Investigative Reporting, which he cofounded in 1977. He’s also been a content executive at KQED, Wired Digital, Salon.com, and Excite@Home. David has published hundreds of articles and three books,including "Raising Hell: How the Center for Investigative Reporting Gets Its Story," and has been teaching journalism for more than 20 years at U.C. Berkeley, San Francisco State University, and Stanford.

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