Last Updated Jul 21, 2009 11:36 PM EDT
With AOL's revenue down 23 percent in the last quarter, what are these people thinking?
Here's what they're thinking, and it's a smarter idea than you think. It looks like AOL is biting the bullet and learning how to charge for these premium positions, and that is great news for online publishing's premium sites, which have been suffering mightily as ad networks have slowly commoditized online advertising. It's all about context. While an ad network might sell inventory on raw numbers and behavioral data across a wide variety of sites, those volume buys don't take into account context; by taking some inventory away, and selling it outside of the network structure -- which AOL is clearly aiming to do with some inventory, despite its ownership of the ad network Advertising.com -- it is betting that less inventory will both improve the user experience, and make the inventory it does make available more valuable. Theoretically, an ad on a prominent property, if it's one of the only ads on that prominent property, should be worth more than if the exact same ad appeared on a page jumbled with other ad messages. Consumers, and advertisers, don't like that.
In fact, Armstrong has been hinting that AOL would take this direction virtually since he took the job. Back in April, at the 4As Media Conference, he said:
I think that content on the Internet will be able to be monetized in a way that is actually respectful of the level of content that actually gets pushed out. And I would go back to the fact that brands are really important. Over the course of time I haven't met many advertisers or agencies that want to attach themselves to [media] brands that are beneath them in terms of the ranking order of brands...In those comments, Armstrong is, of course, officially addressing the AOL brand, but the problem he's describing affects nearly every big content brand out there to some degree. Now, it looks like AOL, of all places, is taking the lead on combatting the big sites' monetization problems. Or is this so surprising? AOL, with its own ad network, and theoretically valuable display advertising positions on its online media properties, is in an unusually good position to see the roles both should have in the online advertising ecosystem. Now it's starting to use that vantage point to do something about it.
People are not paying enough to put their ads on AOL content and that's a problem for us to solve. We have to prove to advertisers that our brand is actually above where it is.