Page last updated at 11:33 GMT, Friday, 11 December 2009

AOL seeks a new growth strategy

Karen Nye
Business reporter, BBC News, New York

AOL boss Timothy Armstrong
AOL's boss faces a tough job to turn around the company, analysts say

Internet firm AOL re-launched itself as an independent company this week in New York, finally ending a protracted divorce from Time Warner, the media company it bought at the height of internet mania nearly 10 years ago.

The new chief executive, Timothy Armstrong, told the BBC in an interview on the floor of the New York Stock Exchange that he knows he has a big job ahead of him.

"I have a company on my hands which needs turnaround, and focus," he said.

A former advertising executive at internet giant Google, Mr Armstrong plans to focus on brand advertising - helping household names profit from the transition to the digital age.

"We see ways to innovate. Larger consumer brands like Procter & Gamble, General Mills and Nike want to follow their customers, making the move to digital platforms like the internet and mobile phones, with ads in multiple formats," he said.

Google is currently the main player, dominating the internet advertising space with targeted, search-related ads.

But, having worked at Google, Mr Armstrong says AOL can use technology to change the way companies advertise online.

"We'll have the best analytics… the best communications tools, the best instant messaging and the best e-mail."

Uphill struggle

The AOL brand strikes many younger consumers as old-fashioned, still selling dial-up internet access in an era when faster, cheaper, wireless broadband access has become the standard.

The AOL brand is certainly well-known, and Mr Armstrong hopes a new approach and a new logo will come to mean something different to consumers.

AOL sponsoring the opening bell at the New York Stock Exchange
AOL shares began trading in New York this week

With the dial-up business still bringing in money, even though it's shrinking, AOL's focus will shift to the content on its many sites, including the technology blog, Engadget.

Mr Armstrong confidently predicts that AOL could become to content what Amazon is to commerce and Google is to online search. He believes that technology can "empower editors and make content deeper, richer and more targeted".

One way to do that, without spending a lot of money, is hiring freelance writers and paying them by the article - a New York Times newspaperman, Saul Hansell, has been hired to manage content creation.

Industry analysts agree that Mr Armstrong faces an uphill climb, especially in the recession-battered advertising space, but AOL currently has no debt, and it's trying to get leaner and meaner, cutting one-third of staff through voluntary buy-outs if possible, and layoffs if not.

Worth an estimated $2bn in its current incarnation, AOL is a much smaller company than the one that bought Time Warner with $147bn of its own shares nearly a decade ago.

And smaller still after its first day's trading - AOL shares lost 2% of their value in New York on Thursday.

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