Display + Search

Thank God for Tim Armstrong. If you believe the hypothesis that Display is converging with Search, what could be a better test than to take one of Google’s starting nine and place him in the great underutilized display asset that is AOL? Nobody can ever say that Armstrong doesn’t get search. And while it gets a ton of grief, it’s hard to say that a platform with 90% reach in the US isn’t a great asset. And to make it really interesting, Armstrong is given a company that ceded search years ago despite having the largest captive audience on the web and one which, even to this day, shows no hint that an understanding of how to sell in a granular, search-like fashion exists in its DNA (although Bidplace is starting to show promise). It goes without saying that this blog will have a lot to say about AOL now and in the future.

So here we are. This is a big week for Armstrong and AOL. The first 100 days are over, he’s starting to talk about where he wants to go, and Friday he gets in front of the whole crew to lay out his plan. Armstrong says his goal is to become the market leader in display advertising. Is a leadership position in display even possible and can AOL get there? And, if so, how?

If by leadership position he means something similar to Google’s leadership in search, this is a pipe dream. Google has 65% of total searches based on the most recent Comscore rankings. Display is a bit more fragmented. Ideally we would measure this by share of all display impressions or revenue, but that data does not exist or is at least not publicly available. AOL leads in terms of Monthly Unique Visitors with ~175 million in May 2009 but Yahoo is right behind with 169MM and Google with 163MM. Another way to lead search is to take over the ad server market, but that is also pretty fragmented with Google’s Dart leading but not far ahead of Atlas and OpenAdstream (and AOL’s Adtech in 4th about 1/3 the size of AOL). Finally, the structure of the industry with several leaders competing, all having their own exclusive owned & operated inventory, and consumers having very disaggregated browsing habits makes a truly dominant position hard to imagine.

If it is apparent that a Google-like domination of display is not possible, what would “the leader in display” look like? While the same market share may not be possible, a real leader would actually have many of the same qualities as Google does in search:

1. Most revenue – It would be hard to call yourself the leader if you did not have the most revenue in the space.
2. First option for buyers – buyers have to think of you first when they think of buying display advertising.
3. Technological leader – the leader has to have the best and most advanced technology.
4. Innovation – the leader needs to be continually pushing the envelope and constantly evaluating and copying or absorbing promisting externally developed technologies.
5. Copycats – the leader needs a track record of competitors copying what it does and continually trying to catch up (think Microsoft and Google)

It’s safe to say that AOL is considerably behind in all of these qualities. But they do have assets that can help get them there and Armstrong and crew seem to be focusing on the right things. As the strategy leaks out, it appears to be focused on strengthening the content and consumer experience on AOL properties while bringing the Platform A display business up to speed with the rest of the industry, and then, presumably, moving into a leadership position.

The focus on content and the consumer is critical. While I personally don’t use any of AOL’s properties, Comscore continually ranks many of their properties as leaders in their areas. So the assets are there. There are two things AOL must change on the content side. First, AOL has a reputation of taking over properties and stalling them. Years ago Mapquest was the default mapping solution (it was actually a verb for a little bit), but earlier this year, Google Maps passed Mapquest in number of users.  Moviefone vs Fandango is another example of this dynamic. Second, AOL has to prove its properties are not leaders simply as a remnant of the old AOL walled garden. Traffic to AOL.com has been declining pretty steadily for years and Quantcast’s look at many of AOL’s subdomains like music.aol.com show a similar trend. All that needs to change.

As for the display business itself, I really like the way Jeff Levick lays it out. First, building a global self service system (hmm.. display/search convergence, anyone?).  While Bidplace is a great start, there is still a ways to go to be world-class in this area.  While buyers can easily change price, it does not yet support retargeting or 3rd party data providers (so AOL is still thinking in terms of properties and sites, not audiences or consumer intent).  These capabilities are likely included in the 3rd piece fo Levick’s strategy, which is to beef up analytical tools to help marketers reach consumers more effectively – yes, a no-brainer.  The second piece of Levick’s plan is to develop a stronger sales force and focus on selling AOL’s premium properties to major marketers.  I would take that one step further – the AOL sales force needs to become solutions and innovation oriented. They should be up to speed on everything that is going on in the display space – from exchanges, to data providers, to social media targeting, etc.  Currently, that mindset is not ingrained in the way they work.

In the end, though, the change will be primarily cultural.  Despite the asset, the experience of Armstrong’s Google Army, and the best strategy in the world, the people of AOL need to take advantage of the opportunity.  AOL’s people are smart, but they need to get some confidence in themselves and their company. They need to think of themselves as having the power to change the industry, not to just react when others have done things. If Armstrong and team can change the culture, then there is no doubt AOL has the potential to take a leadership position in the industry. Without a cultural change, AOL will continue to frustrate its customers and investors until it whithers away to irrelevance.