January 9, 2004 9:14 AM PST

Ad chief exits America Online

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Web giant America Online said Friday that it is replacing its top marketing and advertising executive, Lisa Brown, as the company struggles to spur new growth in its ad sales.

Brown, whose official title was vice president of interactive marketing, was elevated to the position in May 2003, after serving as executive vice president of AOL's marketing strategy group for less than one year. An AOL representative declined to comment on the nature of Brown's departure.

The company also refused to comment on whether it had already chosen Brown's replacement. However, a source close to the situation said the company is talking to Michael Kelly, an advertising executive at AOL parent company Time Warner, about an expanded role in managing AOL's operations.

Under that plan, the advertising unit would also undergo restructuring to bring ad sales and placement teams closer together, and Michael Barrett, AOL executive vice president of worldwide interactive ad sales, would take on many of Brown's daily responsibilities, the source said.

Ad sales have become a sore spot for the giant Internet service provider (ISP), which has come under increasing pressure to improve its financial performance, after dragging down Time Warner's earnings and stock price. The giant media company merged with AOL to become AOL Time Warner before dropping AOL from its name in 2003.

During its third-quarter 2003 earnings report, Time Warner said advertising revenue at AOL continued to fall, plunging 33 percent from the prior year, to $178 million.

However, company executives said in October that the worst may be over for AOL's withering ad sales and that it is already making major changes aimed at streamlining its famously complex sales processes. At the time, Time Warner CEO Richard Parsons reported that AOL sold more new ads in 2003 than in the year before, but it is thought that much of that business was generated by the company's revenue-sharing relationship with search engine Google.

AOL spokesman Jim Whitney said in a phone interview that the company remains bullish in regards to its recent performance.

"We've made a lot of progress in advertising sales over the last year and improved relationships with advertisers and agencies," he said. "Basically, we're selling a lot more ads."

Brown was tasked with replacing Robert Sherman, formerly the president of ad sales at Time Warner Cable, who was persuaded to come out of retirement in April 2002 to help resuscitate sales. During Sherman's tenure, which ended when he retired for a second time last year, AOL laid off 120 employees from its advertising sales unit, or an estimated 17 percent of the group's staff.

Advertising is not the only problem plaguing AOL. The company is also fighting to stem a tide of recent subscriber losses. AOL lost 688,000 U.S. subscribers in the third quarter of 2003, largely from the elimination of free and promotional users, but also including 272,000 paid customers who defected.

Among the strategies the company has undertaken to hold on to subscribers and lure new customers has been the launch of more advanced online functionality and a low-priced ISP service marketed under the company's Netscape Communications brand. AOL is also looking to broadband ISP services as a potential growth opportunity.

In early December, AOL detailed plans to lay off 450 employees in an additional move to streamline its business.

 

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