AOL seeks growth in shift from mass site to niches

[May 17, 2008]  NEW YORK (AP) -- A company rooted in bringing the Internet to the masses, AOL is shifting its focus toward serving niche audiences with the launch of dozens of specialty Web sites.

The latest - ParentDish for parents - formally launched Friday, with The Boot for country music and The Boom Box for hip hop and R&B to follow on Tuesday.

Time Warner Inc.'s AOL, branching out in hopes of doing a better job attracting crucial advertising revenue to offset its rapidly declining Internet access business, calls the niche sites "passion points."

The sites reflect a growing sophistication of Internet users, who are spending less time at portals like AOL.com and Yahoo.com. and directly seeking specialized content at more focused sites. Examples outside AOL include Boing Boing, which keeps tabs on technology and the Internet; The Sartorialist, on street style; or Mom Logic, on parenting and being a mom.

"The consumer market is clearly fragmenting," said Bill Wilson, AOL's executive vice president for vertical programming. "We wanted to give people many front doors, not just one front door to come in."

In a fourth-floor corner office at AOL's new headquarters, once home to the grand Wanamaker department store in New York's Greenwich Village, Wilson was passionate, even hurried, as he zipped through AOL's plans to diversify its offerings.

Over the past several months, AOL has launched or revamped dozens of Web sites - from general portals such as Music and Sports to specialty sites like Spinner for indie music and StyleList for fashion. AOL plans to offer about two dozen more by year's end, including BigDownload for downloadable video games.

AOL isn't alone: Yahoo Inc. recently launched Shine for women ages 25 to 54. But, as the No. 4 Internet property behind Google Inc., Yahoo and Microsoft Corp., AOL has been more ambitious.

"The current problem with an awful lot of the mega sites is the fact that they aren't well targeted," said Rob Enderle, an industry analyst with the Enderle Group. "The material is written and designed for a general audience, and the reality is we are all individuals."

AOL reigned over the Internet when it was known as America Online. It gave millions of Americans their first taste of the Net and had 26.7 million U.S. subscribers at its peak in 2002. But its mostly dial-up base quickly eroded as Americans adopted high-speed broadband services through cable and phone companies.

That forced AOL to change its mission. Instead of locking its news, music videos and other features behind a manicured wall for paying subscribers, AOL began giving away almost everything free through ad-supported sites.

Initially, it tried luring current and former paying subscribers to its free sites. But with ad revenue stagnant, the company is seeking new ways to boost traffic.

"If all you're doing is keeping the people you have, that's not a growing audience," Wilson said.

There are some early signs of success.

According to traffic measurements by comScore Inc., AOL has had seven consecutive months of year-over-year growth in both unique visitors and page views.

For the entire first quarter, page views for AOL's content-focused sites, which exclude e-mail, instant messaging and the general AOL.com portal, grew 22 percent to 9.5 billion compared with the same period in 2007. The content sites had 55 million visitors in April, up 12 percent.

Jack Flanagan, an executive vice president at comScore, said niche sites aren't solely responsible for AOL's growth but have quickly attracted sizable audiences.

The traffic growth, however, hasn't translated to ad dollars, which were flat in the first quarter. In fact, non-search ads on AOL sites declined 18 percent compared with the same period in 2007. The big growth has been in ads that AOL brokers for third-party sites - such as the blogs vying for the same eyeballs as AOL's new niche sites.

Executives have been blunt: AOL made key mistakes integrating $1 billion worth of corporate acquisitions into a single "Platform-A" advertising unit. Its sales forces weren't aligned, and in some cases they were effectively undercutting one another on prices.

With new management, reorganized sales teams and new self-service tools for advertisers, AOL hopes to grow ad revenues on its sites again. The niche sites will be an important part of the mix, said Lynda Clarizio, president of Platform-A.

AOL already has behavioral-targeting technologies meant to let advertisers reach audience segments wherever they are on the Internet, but Clarizio said nothing can match reaching them when they are already engaged in a subject. The niche sites should help AOL attract sponsorship deals and other coordinated ad placements.

"That generally is the most valuable advertising inventory, the most expensive," Clarizio said.

Wilson said launch decisions are primarily based on whether AOL can offer consumers an experience unmatched elsewhere. Advertising potential is also crucial - Wilson likens it to broadcast networks canceling shows that cannot draw ad revenue.

The individual sites are being given unprecedented freedom - in many cases even shedding the AOL brand - to best appeal to a particular community.

ParentDish, tapping into parental desires to connect, hopes to let visitors to share photos and ask one another questions. In a twist, ParentDish will use Yahoo's Flickr rather than AOL's own photo services.

The Asylum site for young men takes an irreverent tone - and devotion to the pursuit of women. The lead item recently: "How to Make Searches for Hot Babes Even Hotter."

With the new site on country music, AOL is adopting a homier feel. The Boot plans to go beyond the better-known artists who have crossed into the mainstream, something that might not appeal to a broader audience.

Such genre-focused sites allow writers to make assumptions about the visitor's knowledge, even posting jokes that would fly over the heads of a mainstream audience, said Bill Crandall, editor in chief for AOL's music sites.

Most are adopting a blog-like format to engage its visitors, a formula that has worked extremely well with TMZ.com, the celebrity-gossip site jointly run by AOL and Time Warner sister company Telepictures Productions.

In a departure, the new sites routinely link to articles found elsewhere. AOL would rather have visitors start at one of its sites than bypass them completely for the blogs.

"A few years ago, if we didn't have it, we didn't want people to know we didn't have it," Wilson conceded.

Stand-alone sites also can be tailored to appear higher in search rankings. And executives believe that some bloggers would be more willing to link back to an item on, say, Asylum than on the AOL.com portal.

AOL's plans also include integrating its popular AIM instant-messaging platform so users can see other AIM members currently on a particular site.

But Sarah Rotman Epps, an analyst at Forrester Research, warned that all of AOL's niche offerings may not attract the total numbers they're seeking.

"There's no way they can possibly anticipate all the ways consumers will want to bend and shape their own content," Epps said. But she credited AOL for trying.

"They need to do something different. They need to keep innovating and experimenting and sometimes fail (in order to) find things that do work."

[Associated Press; By ANICK JESDANUN]

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