Wetpaint CEO Ben Elowitz on the Future of Digital Media
Tim Armstrong, AOL’s CEO, has rebooted AOL with a talk-track of branded destinations, A-level journalism and sizzling original content; and early Monday morning, a full week before Valentine’s Day, his romantic media vision was considerably enhanced, when Arianna Huffington announced that she was selling Huffington Post to AOL for $300 million in cash and $15 million in stock.
For the record, that’s quite a premium price – 10 x Huffington Post’s $31 million in revenues.
Despite the cost, however, Armstrong is a very lucky man, and he received a wonderful gift from Huffington, whose hugely successful and much-talked-about Web site is a perfect match that helps “complete” AOL.
Indeed, the relationship between Armstrong and Huffington comes not a minute too soon for AOL, which is finally bringing on real creative assets and talent – including Arianna Huffington, herself, as chief editorial taste-maker.
To be honest, the media industry has been wondering whether Armstrong could actually pull off a deal like this. (True Confession: I’ve been among the doubters.)
And there’s good reason for the skepticism.
The problem, in large part, has been strategic. Since he assumed the CEO’s post, Armstrong has talked with clarity about his vision for an AOL made up of destination media brands, the way Time Inc. and Conde Nast have built their portfolios. But to date, his build-out of this city on a hill has fallen short. Instead of buildings gilded with leading journalism that attracts fame and eyeballs, his properties have largely been constructed by plumbers and mechanics laying a foundation for search engine rankings.
That’s why AOL’s recently leaked master plan, “The AOL Way,” is heavily oriented toward users’ search queries. The playbook emphasizes volume of content, page-views per post, and production cost per-piece. And, while “The AOL Way” is punctuated by periodic reminders like “quality content at scale,” the reader of the plan is left with the distinct impression that quality is a guardrail, not a compass direction for the journey to ROI nirvana.
Indeed, without a voice or a purpose other than page-views, “The AOL Way” comes off as soulless. Instead of emphasizing audience interests, an editorial point of view, or premium differentiation, it’s a volume strategy: the plan calls for the number of stories to jump from 33,000 to 55,000 a month; with median performance to go from 1,512 page-views per article to 7,000 within the quarter; all while gross margins rocket from 35 percent to 50 percent.
This Google-ingratiating strategy, at least from my perspective, is wrong-headed and short-sighted. It doesn’t do anything to help build a unique and long-lasting brand that is meaningful for audiences. And, as a result, it does very little to encourage people to eagerly and voluntarily type “AOL.com” into their browser’s destination bar. With this playbook, consumers don’t go to AOL; they merely end up there.
There’s a solid lesson here for all of us.
AOL – like everybody else in the media business – is clearly jealous of Facebook’s gravity-defying results. But it takes time for a proper media brand to achieve such stratospheric numbers. The great brands – The New York Times, ESPN, CNN, Wall Street Journal – have shown us that you build audience loyalty one positive interaction, one ambitious story, and one rich consumer experience at a time. To be sure, Huffington Post has shown us that, building its audience to a reported 25 million uniques over a well-paced five years.
So, it doesn’t happen overnight, and it certainly doesn’t happen if you’re just playing for quick search engine results.
Looking forward, it will be interesting to see whether Huffington – a savvy and independent thought leader who has always leaned forward – chooses to embrace “The AOL Way.”
My sense is that she will continue to follow her well-honed consumer-focused instincts instead. She brings a strong point of view, a decidedly human nose for news, and a variety of social strategies for distribution – not to mention her considerable star power. And that’s a good thing for AOL.
It’s important to recognize Armstrong’s considerable achievements. He saw that AOL’s subscription model was a non-starter; he chose areas of core content concentration for AOL; and, unlike Yahoo!, for example, he pared AOL’s portfolio quite dramatically.
But the pre-Valentine’s Day courtship and consummation with Huffington will mean very little in the consumer marketplace if Armstrong doesn’t get rid of his seemingly unshakable Google obsession – and very soon.
Here’s hoping that Arianna can help nurture Tim’s AOL, and turn it into a true media destination.