Digital Media

What's old is new again on the Internet.

As AOL spins out from under the historic but disastrous Time Warner deal, it will find itself up against an old foe: Yahoo. Both Yahoo and AOL are attempting to shed their legacies as old-school Internet companies snowed under by the rise of Google by turning themselves into Internet destinations. Long live the portal.

Although the companies have never really stopped competing, things are certainly different this time around. Yahoo is arguably in the better position, with more resources and traffic surrounding its media properties as well as healthy e-mail and instant messenger usage that drives traffic to those properties. AOL is fighting uphill, with an e-mail domain that evokes retirement communities and much of its content strategy revolving around a project that solicits writings and photos from freelancers.

But with traditional advertisers finally starting to show tepid interest in Internet display advertising, there is likely some room for AOL at the table. Expect the two companies to run to different ends of the market, with Yahoo pushing its sites as high-quality, professionally run havens for major advertisers, and AOL stressing its reach and ability to target niche audiences.

On Thursday morning, as AOL began trading on the New York Stock Exchange, its shares were down about 2 percent to the vicinity of $23.25. Yahoo's shares stayed essentially flat, at around $15.30.

AOL's content plan revolves around a combination of professional writers and editors and crowd-sourced content. It launched Seed.com as a Web clearinghouse for the freelancers of the world to submit content in hopes of seeing it featured on AOL's sites, and hired New York Times writer Saul Hansell to oversee the project.

AOL CEO Tim Armstrong plans to direct that editorial operation with technological prowess, analyzing hot topics on the Internet and planning coverage around the zeitgeist. It's not as novel an approach as some may think: Internet news organizations of all shapes and sizes make coverage decisions based on how readers respond to certain topics.

But it does indicate that AOL plans to go after the same space as Yahoo. Both companies are attempting to turn themselves into sources of original content that is both compelling to both the masses and the critics, not to mention the advertisers.

AOL CEO Tim Armstrong

(Credit: Google)

Yahoo is currently trying to increase the amount of content it produces in-house, which hovers around 20 percent at the moment, depending on which part--Yahoo News, Yahoo Sports, Yahoo Entertainment, or Yahoo Finance--you're examining. The rest comes from content partners and wire services.

AOL, on the other hand, already produces around 80 percent of its own content. "I think when you own and are able to operate that content, the advertisers actually are very attracted to it," Armstrong told CNBC on Wednesday.

While that may be true, advertisers also like eyeballs. For the most part, Yahoo's properties are No. 1 or 2 in their respective fields, while AOL has a few winners in sites like Engadget and Moviefone but otherwise trails by a significant margin in those categories. Overall, Yahoo operates the second-largest group of Web sites in the U.S. with 158 million unique users, trailing only Google. AOL's network is the fourth-largest in the U.S. with 98 million unique users, according to ComScore.

AOL thinks it can offset that advantage by becoming the best content provider in a number of niche categories and then selling advertisers on the benefits of targeting that niche. "As the Internet becomes more fragmented, when--if--you can produce great content in niche areas and then really leverage the distribution on the Internet, you're looking at a very high scale, high ROI, return-on-capital business," Armstrong said in the same interview with CNBC.

It's not clear whether Armstrong has dialed up a winning strategy as he prepares to take one of the pioneering companies of the Internet back out on its own. He is, however, facing much more competition than the last time AOL was trying to make a content business on its own, and unlike that last time, he can not depend on a growing source of revenue from Internet access accounts.

Story updated at 7:00 a.m. PST with Thursday morning stock movement for AOL and Yahoo.

In preparation for its upcoming spin-off from parent company Time Warner, AOL has named nine members to its board of directors--and from what it sounds like, more additions to the board could be coming.

The current lineup includes former Amazon Chief Information Officer Richard Dalzell, Plainfield Asset Management partner Karen Dykstra, financial services exec William Hambrecht, Paley Center for Media Director Patricia Mitchell, former FCC Chairman Michael Powell, former CBS Chief Financial Officer Fredric Reynolds, former Procter & Gamble exec James Stengel, and ex-William Morris Agency CEO James Wiatt.

"AOL is very fortunate to have an exceptional group of proven leaders to serve on our board of directors," CEO Tim Armstrong, who took over the reins of the company this spring, said in a release. "AOL is on a mission to help create the future of media and content and the AOL board will play a central part in helping us focus the strategy and also operate the company with the highest ethical standards."

The majority of the board members don't hail from Armstrong's own Silicon Valley turf: the CEO served as Google's director of sales up until his hire at AOL. But most of them are veterans of traditional media, which presumably will give the onetime dial-up king an advantage as it attempts to shape itself into a digital-content power player--at least on the surface.

(Disclosure: One of AOL's new board members has a past affiliation with CBS Corp., which publishes CNET News.)

SAN FRANCISCO--Tim Armstrong is such a tease.

The AOL CEO, speaking at the Web 2.0 Summit on Thursday, didn't have any high-profile announcements like many of the other speakers at the conference. But instead, he hinted that one might be on the way.

"We have been working on something for the last three months that I think is a fairly substantial shift in our technology," he said. "When that's ready to announce, maybe we'll come back and talk to you about it."

Interviewer and conference organizer John Battelle tried to pry more information out of him, to little avail. But it sounds like it has something to do with the framework that powers AOL's network of blogs and content properties.

"It's a broader platform with more information around content and the creation of content," he said. "We see that platform evolving to a much higher scale."

Armstrong, who joined AOL in March after a stint as head of sales at Google, said that recently the company has increased its roster of journalists from 500 to over 3,000, and that over 3,000 pieces of content are posted every day to AOL properties. It's also now creating three to four times as much video as it was several months ago.

"We've hired people from places like The Wall Street Journal and ESPN," Armstrong said. "You're not just hiring a person, you're hiring the community they come with, and I think that has been an important part when you look at the network effects of that."

It's still not clear how AOL, currently in the process of being spun out from parent company Time Warner, will rake in profits from this huge investment in media content. Armstrong seemed unfazed.

"If you're not going to take risks and you don't think the future is bright," he said, "the Internet is probably not the right place for you."

AOL CEO and former Google sales exec Tim Armstrong.

(Credit: Google)

We get it, Tim Armstrong. We know the still relatively new AOL CEO is all about reinventing the once-mighty online access company into a digital publishing powerhouse. But that didn't stop him from really hammering the point home at The Atlantic's First Draft of History conference on Thursday morning.

"What is the future of the company?" Armstrong, who previously served as a high-profile sales executive at Google, said in his talk, which was streamed live online. "If I had to describe it in one word, I think it's content, and I think it's content because there's an opportunity to marry what the content's already done with what the content can do."

One of his goals at AOL, he said, is to evolve and simplify the display advertising industry in a manner inspired by the success of search advertising. "When you have millions of advertisers that can sign up online in 10 minutes and run a global search campaign," he explained, "the same thing needs to be brought to display."

Armstrong has reason to believe in content. AOL acquired a solid portfolio of blogs when it purchased publishing network Weblogs Inc. in 2005, and the titles it's launched since then have largely been well-received--even though Armstrong promptly did away with the "MediaGlow" branding that had been established for the company's content division soon into his reign as CEO.

AOL has reach: 100 million visitors in the U.S., and 275 million globally. It'll soon be wholly independent from parent company Time Warner. Plus, the traditional print publishing industry is so beleaguered that it's about time a digital power stepped up to the plate.

But there are still plenty of issues at stake. Armstrong said that the ultimate answer to one of the biggest controversies in new-media publishing--do you charge for it or not?--will be that the Web will gravitate toward a mix of free, ad-supported content and paid offerings.

"I think consumers are smart. I think that if the content is really good, people will pay for it," he said. "I do think there's cases where I think if you can add enough value to content, people are going to pay for it. I think The Wall Street Journal's a good example of this."

Meanwhile, Armstrong expects the digital advertising industry to continue to mature, despite the fact that revenue has still been dampened by the recession. "When I came from Google to AOL the first meeting that I did was in Baltimore, at our Advertising.com (offices)," he related, referring to the ad network that AOL acquired in 2004. "One of the employees said, 'How many ad campaigns do you think we should be running?' and I said, I don't know, 500,000, and the audience went blank."

He continued, "The number was a few thousand, and for me that was shocking because I came from a place where we went from having a few hundred customers to having a million customers. And why hasn't AOL thought in that direction and that scale?"

Part of achieving that scale, he explained, involves getting pretty deep into local advertising markets, something that AOL sees as an untapped resource for both audiences and ad dollars. At the Atlantic event, he showed off some visuals from Patch, the local-news start-up that he invested in prior to his arrival at AOL; AOL ultimately acquired it. The start-up is currently restricted to about a dozen towns, mostly in New Jersey, but a gradual expansion is on the road map.

"In the town we're covering every single thing that a consumer in that town should be concerned about," Armstrong said of Patch, which employs a professional journalist in each town as well as aggregates local news from other sources. "The thing you don't see from the surface here is (that) we built a massive structured database underneath this. We've digitized the entire town."

As the 'Superbad' character McLovin taught us, a name change can make all the difference.

(Credit: Columbia Pictures)

It's out with the not-so-old and in with the new for AOL CEO Tim Armstrong as he commemorates 100 days at the helm of the dot-conglomerate. Less than a year after AOL launched a new brand called "MediaGlow to encompass all its publishing properties, the company is getting rid of the name and reestablishing it as the far less cute "AOL Media." The company's advertising division, Platform-A, is now "AOL Advertising."

And the properties grouped into the "People Networks" division that was established when AOL acquired social network Bebo (for way too much money) will be worked into three new divisions: AOL Communication, AOL Local and Mapping, and AOL Ventures.

The announcements were made at the latest stop for the "100 Days of Tim Armstrong" party train, a company "revival" meeting in a massive air-conditioned tent (yes, like an evangelical preacher, Tim Armstrong threw a tent revival) in which employees were encouraged to post to Twitter about the goings-on and tag it all with #aol100.

Business Insider was watching the tweets roll in, and picked up on Armstrong's announcement of the division name changes.

But on a more serious note, this does represent a strategic shift in direction for AOL, at least on the marketing front. Brands like Platform-A and MediaGlow seemed to consciously avoid the AOL moniker, which still hasn't shaken off the connotations of late-'90s dial-up access. Armstrong, it appears, believes that keeping "AOL" in there will actually make things stronger--he comes, after all, from Google, which proudly displays its primary-colored logo on virtually all of its properties. At the very least, it'll express a bit more internal faith in the viability of the AOL brand.

Maybe they can do a "you've got mail" mashup remix while they're at it.

UPDATE at 5:21 p.m. PT: Reader David Montgomery made some hilarious art for the occasion, inspired by the poster for the new movie "500 Days of Summer":

(Credit: David Montgomery)

AOL CEO Tim Armstrong (right) speaks with Fortune's David Kirkpatrick at the Brainstorm: Tech conference on Thursday.

(Credit: Ina Fried/CNET)

PASADENA, Calif.--The Tim Armstrong road show continued on Thursday, with the AOL chief executive dropping by the Fortune Brainstorm: Tech conference.

Armstrong made many of the same arguments he has been making--namely that the Internet is still in its infancy and that AOL represents one of the biggest opportunities and challenges in the Internet arena.

The former Google executive laid out the areas where AOL plans to focus--display advertising, content, messaging and local services, including the once-leading one--MapQuest. In that last area Armstrong acknowledged that the company has fallen behind.

"We probably missed a generation of technology which we are working on right now," he said.

Armstrong said that the company doesn't have to dominate these areas to be successful, but it does need to be one of the leaders. In addition to existing areas, Armstrong said there are significant "white spaces" on the Internet where AOL can build a business.

However, Armstrong was short on specifics on how the company will improve its existing businesses or which new areas it will tackle.

The company is looking at buying some businesses and selling others of its units. However, Armstrong said it isn't the same list of acquisition targets or divestitures that the company was planning when he arrived.

Armstrong said that some of the units that the company planned to get rid of are actually some of the areas he says have become key to its new strategy. He also said that on his first day there was a "$400 million check" that the company wanted him to sign; Armstrong said he didn't make that purchase.

The audience was asked to vote whether AOL would slowly run out of juice, stay profitable but not a leader, or return to health as a major Internet player. Nearly half of respondents chose "run out of juice" before Armstrong's talk and only about 30 percent said so after the panel wrapped up.

"So you are a good presenter," said moderator and Fortune writer David Kirkpatrick.

This week there is just no shortage of dudes named Armstrong in the press. There's the one who rides bikes and likes to tweet about it, the one who walked on the moon 40 years ago, and then there's Tim Armstrong, who has officially been CEO of AOL for 100 days as of Monday.

So he celebrated with press coverage! Armstrong interviews were published Monday on by the Associated Press, AllThingsD, AdWeek, and Advertising Age, and AOL advertising chief Jeff Levick talked to PaidContent. We hope Armstrong also commemorated the 100-day mark with some cupcakes, because while press coverage about ambitious future plans is generally a good thing for a new and already scrutinized executive, it doesn't taste good with buttercream frosting.

So what did Armstrong say? Basically, a whole lot about reinvention. AOL is slated to be spun off from parent company Time Warner in November, and will "be focused on scaling content, advertising, e-mail, messaging and local, but making it easier and less complicated," according to AllThingsD.

That may mean ditching some products--there are over 100 advertising products in AOL's portfolio, for example. And AOL has removed some of the ads from its own sites, making them appear less cluttered (like MapQuest, which had its 17 ads narrowed down to seven, per AdAge). But according to PaidContent, AOL will be ramping up its display advertising business, attempting to take hold of a niche in the market that has been in decline as search ads rose to prominence.

AOL, meanwhile, is "happy" with its search deal with Google, which is set to expire next year, but Armstrong, who headed up sales at Google before his hire at AOL, didn't tell any of the various reporters who pestered him whether they'd renew it. But he did hint that Bebo, the $850 million social-networking buy that AOL made last year, is basically getting shelved.

"Bebo has an opportunity to prove its products and services," Armstrong said to AdAge. "I would argue that the integration of Bebo (with AOL) is less important than having Bebo focus on its core product and service and really try to improve in the social-networking space." The social network has been grouped into AOL Ventures, a side arm of the company for acquisitions and investments outside of AOL's main content and advertising businesses.

It's like a splashy celebrity drama: according to PaidContent, AOL subsidiary TMZ.com will no longer use AOL to sell its ads and instead will be taking those operations in-house. Television ads will be handled through Telepictures, the Time Warner division that teamed up with AOL to launch TMZ in the first place.

The reasoning, according to PaidContent, is that the Hollywood news and gossip site--which was the first to break the news of Michael Jackson's death--has simply gotten too big for AOL's Platform-A technology. TMZ has been one of AOL's foremost success stories of late, and has served as an indicator of how the once-mighty tech company could reinvent itself as a successful digital publishing power under the auspices of new CEO Tim Armstrong.

This could be a messy breakup on the ad sales front. AOL is in the midst of being spun off formally from Time Warner, with which it became joined at the hip in a massive 2000 merger. Platform-A has gone through one management change after another, and though it has significant reach across the Web, still struggles for legitimate industry cred when it comes to both Silicon Valley and Madison Avenue.

Losing a major player like TMZ will be another blow to Platform-A's image. The bigger question will be whether, as PaidContent suggests, TMZ itself may spin off from AOL--something that seems ludicrous, given AOL's plans to be a digital-age Conde Nast or Time Inc.

But things might actually be simpler: as a PaidContent commenter noted, TMZ might be hunting for advertisers willing to work with content a little bit racier than the family-friendly AOL norm. You know, like hard-hitting investigative reports about just how see-through Megan Fox's outfit was at some L.A. nightclub the other night.

A nice little summer shopping spree for AOL: Under the auspices of new CEO Tim Armstrong, the company has acquired "hyperlocal" news site Patch and hipster-oriented events listing site Going.com.

The acquisition of Patch isn't too much of a surprise. Armstrong founded and invested in Patch while at his former gig as Google sales chief. The start-up offers a model for local news on the Web and plans to have launched in a dozen cities by the end of 2009. Going, meanwhile, has been around since 2006 and offers event and invitation services along with ticketing. It's likely that AOL will use its technology to take the service beyond its party-friendly current target demographic.

"Local remains one of the most disaggregated experiences on the Web today--there's a lot of information out there but simply no way for consumers to find it quickly and easily," Armstrong said in a release. "Going forward, local will be a core area of focus and investment for AOL. The acquisitions of Patch and Going will help us build out our local network further with excellent local services that enable people to stay better informed about what's going on in their neighborhood."

He's not the only new-media executive thinking local: in his keynote address at the Advertising 2.0 conference on Wednesday, IAC/InterActiveCorp CEO Barry Diller called local "one of the few areas that hasn't been colonized" on the Web. IAC owns Citysearch, with which AOL has partnered in syndication deals.