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Tom Grubisich, a former AOL editor, has written a piece in the USC Annenberg Online Journalism Review criticizing Steve Case for ‘fumbling’ the company. From Who 'shackled' AOL - and when?...

Aol.com was supposed to throw off those shackles and offer compelling new content, according to Case's strategy. But it never happened. Case let AOL retreat from his ambitious plans and the company failed to develop high-speed content and platforms that it could test with its potential new audience that was exploding on the Internet. Aol.com wound up becoming nothing much more than a docking station where AOL members could read their e-mail at work and where non-members could sign up for AOL's Instant Messenger service, or try to join the invitation-only ICQ social network.

So why didn't Case follow through on his pledge to let AOL grow beyond its walled garden? I believe the answer is embedded in the company's need to continue producing solid quarterly financial results that would keep the stock going up -- results based on membership, not on edgy content. In 1997, subscriptions for the main service were pumping more than $1.5 billion annually in AOL's coffers -- 80 percent of all revenue. Case and his top decision-makers did not want to tamper with the Wall Street-pleasing metric of subscriber growth -- even though they made public gestures toward a revenue model more balanced by advertising. (We now know, of course, that a lot of that advertising was a phantom).

In one sense, you couldn't blame the Case team. AOL's numbers seemed invincible in 1997 -- a third of all Internet users in the U.S. were AOL members at that time. Throw in the existing placeholder site, aol.com, and AOL controlled 50 percent of Internet traffic. If you had an office on the fifth floor of AOL's headquarters in Dulles, Va., you could imagine you were on top of the Internet world.

Alright; I’m sure Mr. Grubisich is a fine person, but if he’s going to step up to the soapbox he better understand the maxim “live by the sword, die by the sword.” The article is well written, but Grubisich shouldn’t quit his day job as an aspiring screenwriter (his byline says he is a screenwriter though a search for published work did not reveal any published scripts… though he maintains an MSN email account – the hallmark of screenwriter superstardom).

Firstly, this article on AOL makes references to shackles, fumbles, and blame. Is there anyone on the planet that thinks of AOL as a failure or a case study for losers? AOL is a massive success story. AOL’s success is so massive (28 million subscribers and billions of dollars in revenue) that only a fool would intimate that AOL has somehow “fumbled.”

Yes, AOL has been overtaken by others in terms of total revenue and eyeballs. Much blame could in fact be laid at the feet of Time Warner that has done almost nothing with it since acquiring it years ago.

However, Grubisich blames AOL’s ‘fumbling’ on Steve Case and a failure to invest in content. Talk about sour grapes from a former disgruntled employee.

Did I mention that he was a former, AOL editor who was paid to write content for AOL?

Grubisich claims AOL’s failure stemmed, in part, from a lack of investment in high-speed content. Good lord; please name for me one high-speed content site that makes significant money?! The answer is none. The vast majority of users are not willing to pay for it and most get if for free. AOL’s strategic focus was never content – it’s not a newspaper nor a magazine nor a video channel. To the contrary, AOL’s success has come as a result of its strategic focus on subscribers.

I mentioned a few leaders in my opening line: Google, Yahoo!, Amazon and E-Bay. Each of these companies built successful strategies based on a principal focus – to be the very best at their core expertise:

Google – the top search engine
Amazon – the top e-commerce site
E-Bay – the top auction site
Yahoo! – the top integrated portal

AOL’s focus: be the top ISP subscriber. AOL stuck to its focus and found massive success. Had it invested in content it would have failed miserably. Just ask Yahoo! who only recently got cocky enough to hire its own dedicated writers to cover current affairs with underwhelming results. Grubisich lays blame for allowing Google and Microsoft to overtake AOL. Google is a search company, with a lightning focus on search; Microsoft is a software company. AOL is neither a search company nor a software company. AOL’s primary focus is being an ISP. (And of Microsoft, ask them how their stock price has been for the past seven years trying to be an Internet company and how their Internet revenues compare to their software revenues).

Note that I say ‘primary’ as every large company diversifies and AOL is no exception. However, the primary focus continues to be that which has made them a success: subscribers. Not subscribers of content, but subscribers of ‘access’ (to the Internet). I am not suggesting that AOL should never invest in any content. They should, but only as a means to an end, not as a primary strategy.

Here’s the lesson that I will underscore using the first and most important of the 22 Immutable Laws of Marketing penned by the great Al Ries and Jack Trout:

Law #1: The Law of Leadership

It’s better to be first than it is to be better.

To quote Ries and Trout: “It’s much easier to get into the mind first than to try to convince someone you have a better product than the one that did get there first.”

AOL would fail horribly if it shifted strategies to focus on content – it’s not a newspaper, magazine nor video channel. And the paying public would never fail to mistake AOL for anything but an ISP. Others focused on content and beat them to it. Despite Time Warner’s meddling (or lack thereof), AOL has enjoyed massive success because of its primary focus on adding and maintaining subscribers. For AOL, content is not king.

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Wednesday, January 11

Evolution of search in 2006

by Toby Ward on Wed 11 Jan 2006 09:37 PM PST

The prognostications continue. David Berkowitz writes a fine piece on his predictions for the search market in 2006 (weekly Search Insider column The Definitive Guide To 2006.) David makes some great predictions (unabridged)….

1) Mobile search remains confined to text messaging. The easiest way to access Google on your cell phone is by text messaging GOOGL (46645). On a recent date at an Indian restaurant, I demonstrated my geek chic by sending Google the text message "Indian 10024" (noting the zip code). I then received messages listing two restaurants, one of which was the place we were eating (amazingly, I had a subsequent date with her). Meanwhile, if I had tried to show her Google on my wireless browser, the check would have been paid well before I could fire off a search query. Factoring in network speeds, device screen sizes, and usability, text messaging will remain the killer mobile app for search next year, and it really isn't search at all. That being said, the recent announcement that iCrossing is the first search engine marketing agency to join the Mobile Marketing Association will spawn a slew of related stories. That's smart prep work for a time to come, but 2006 isn't the year. As an aside, with iCrossing's Web site now referring to the company as a "digital marketing agency," its mobile ambitions may not be search-related at all.

2) Yahoo! is the partner everyone wants to dance with. Google's the player to beat in the search space, which gives Yahoo! clout as the No. 2 (even as its properties pull in more traffic). Now, with Google's stake in AOL, Time Warner's competitors, ranging from print publishers to TV networks, will be even more intrigued to talk to Yahoo! CEO Terry Semel, who spent over two decades at Warner Bros.

3) Google Wallet goes Base jumping. Google will integrate its credit card-based transaction system (now used for AdWords and most recently Google Video) with Google Base, its new classifieds offering. This will complete Google's evolution as a competitor to eBay (along with Monster, Amazon, and too many others to name). By accepting consumer payments as part of Google Accounts, Google will welcome its first significant revenue stream outside of sponsored links.

4) Measurements debut for engagement; search is neglected. I had a discussion with my colleague Chris Johnston about engagement, and the topic of classifieds came up. CJ noted how classifieds can be considered a baseline for measuring engagement. That doesn't mean they'll be included in any studies. The same will be true for paid search ads, which are similar to classifieds, but with broader targeting and more interactivity.

5) Jeeves goes local. 2005: InterActiveCorp acquires Ask.com. 2006: It aims to really get its $2 billion worth. This prediction ran in an April, 2005 column, "The Many Faces of Local": "The word 'local' isn't in IAC's mission statement, nor is any synonym, but given IAC's expertise and its dreams for Ask Jeeves, that should change immediately. Jeeves, the beloved Ask.com butler, could become the face of local search if Diller invests in it with the same type of fervor in which he bid for Ask Jeeves in the first place."

6) iTunes overhauls its search functionality. Google wants to be a music search engine. For many digital music lovers, iTunes fills that role. As Google competes more with iTunes, Apple can't let another one-up it here.

7) MSN fells more trees. Think of the "tree falling in the woods" paradigm. If no one hears it, does it make a sound? MSN, for 2006, will be in the business of knocking over trees--it'll clear entire forests. The media will fawn over MSN's achievements. Marketers will open their eyes and their wallets, a bit. But consumers are far harder to impress. MSN is a strong player for long bets. It's akin to the prediction for mobile search, which has another interesting connection to MSN. Microsoft's power stems from its operating system. If Microsoft gains traction with powering mobile devices, MSN can in turn win mobile search. Again, none of that's happening in 2006, but print this out, and check back to this point as your paper starts to yellow.

8) Behavioral targeting and search join forces. I can see it coming one day this year: I get all excited about covering a new development in search, and find out that it's already been covered in Mediapost's Behavioral Insider. This happens to Gord Hotchkiss and me all the time with search, but overlap with BT (ed: behavioral tracking) is overdue. MSN AdCenter provided a road map last year for how to combine demographic targeting with search marketing. One or more search titans will set a similar bar for BT and search.

Here’s another prediction, one not touched upon by Berkowitz: click fraud will turn the paid search industry topsey turvey. Hackers will find better ways to embellish click-through rates and to cover up others.

This increase in click fraud will hammer Google and its stock price. The honeymoon for Google will end. Long-term, Google is still a giant. But Google’s Teflon coated luster will scratch this next year. Furthermore, it will come to light that some metrics analysis programs (log analysis programs) are not accurately tracking click-through rates.